Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements Are Subject to Change

This Quarterly Report contains certain forward-looking statements (as defined in the Securities Exchange Act of 1934 and the regulations thereunder). Forward-looking statements are not historical facts but instead represent only the beliefs, expectations or opinions of the Company and its management regarding future events, many of which, by their nature, are inherently uncertain. Forward-looking statements may be identified by the use of such words as: "believe", "expect", "anticipate", "intend", "plan", "estimate", or words of similar meaning, or future or conditional terms such as "will", "would", "should", "could", "may", "likely", "probably", or "possibly." Forward-looking statements include, but are not limited to, financial projections and estimates and their underlying assumptions; statements regarding plans, objectives and expectations with respect to future operations, products and services; and statements regarding future performance. Such statements are subject to certain risks, uncertainties and assumptions, many of which are difficult to predict and generally are beyond the control of and its management, that could cause actual results to differ materially from those expressed in, or implied or projected by, forward-looking statements. The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: (1) economic and competitive conditions which could affect the volume of loan originations, deposit flows and real estate values; (2) the levels of non-interest income and expense and the amount of credit losses; (3) competitive pressure among depository institutions increasing significantly; (4) changes in the interest rate environment causing reduced interest margins; (5) general economic conditions, either nationally or in the markets in which the Company is or will be doing business, being less favorable than expected; (6) political and social unrest, including acts of war or terrorism or (7) legislation or changes in regulatory requirements adversely affecting the business in which the Company is or will be engaged. The Company undertakes no obligation to update these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made.

General

The Company was formed in connection with the Bank's conversion to a stock savings bank completed on July 3, 2007. The Company's results of operations are dependent primarily on the results of the Bank, which is a wholly owned subsidiary of the Company, along with the Bank's wholly owned subsidiaries. The Bank's results of operations depend, 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. Our results of operations are also significantly affected by general economic and competitive conditions, particularly changes in interest rates, government policies and actions of regulatory authorities. Future changes in applicable law, regulations or government policies may materially impact our financial condition and results of operations.

At June 30, 2026 the Bank has five wholly-owned subsidiaries, Quaint Oak Mortgage, LLC, Quaint Oak Abstract, LLC, QOB Properties, LLC, Quaint Oak Insurance Agency, LLC, and Oakmont Commercial, LLC, each a Pennsylvania limited liability company. Quaint Oak Mortgage offers mortgage banking in the Lehigh Valley, Delaware Valley and Philadelphia County regions of Pennsylvania and began operations in February, 2019. Quaint Oak Abstract offers title abstract services primarily in the Lehigh Valley region of Pennsylvania and began operation in July 2009. 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 began operations in August 2016 and provides a broad range of personal and commercial insurance coverage solutions. Oakmont Commercial, LLC was formed in October 2021 and operates as a nationwide specialty commercial real estate financing company.

Critical Accounting Policies

The accounting and financial reporting policies of the Company conform to accounting principles generally accepted in the United States of America and to general practices within the banking industry. Accordingly, the consolidated financial statements require certain estimates, judgments, and assumptions, which are believed to be reasonable, based upon the information available. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the periods presented. Critical accounting policies comprise those that management believe are the most critical to aid in fully understanding and evaluating our reported financial results. These policies require numerous estimates or economic assumptions that may prove inaccurate or may be subject to variations which may significantly affect our reported results and financial condition for the current period, or in future periods.

The Company's critical accounting policies involving significant judgments and assumptions used in the preparation of the consolidated financial statements as of June 30, 2026 have remained unchanged from the disclosures presented in our Annual Report on Form 10-K.

Comparison of Financial Condition at June 30, 2026 and December 31, 2025

General. The Company's total assets at June 30, 2026 were $630.3 million, a decrease of $45.5 million, or 6.7%, from $675.9 million at December 31, 2025. This decrease in total assets was primarily due to a $21.3 million, or 34.9%, decrease in loans held for sale, a $19.3 million, or 3.6%, decrease in loans receivable, net of allowance for credit losses, and a $5.3 million, or 9.9%, decrease in cash and cash equivalents.

Cash and Cash Equivalents. Cash and cash equivalents decreased $5.3 million, or 9.9%, from $53.5 million at December 31, 2025 to $48.3 million at June 30, 2026, due to reduced liquidity needs.

Investment in Interest-Earning Time Deposits. Investment in interest-earning time deposits increase $100,000, or 11.0%, from $912,000 at December 31, 2025 to $1.0 million at June 30, 2026 due primarily to a purchase of these securities during the six months ended June 30, 2026.

Investment Securities Available for Sale. Investment securities available for sale decreased $274,000, or 31.1%, from $882,000 at December 31, 2025 to $608,000 at June 30, 2026, due primarily to the principal repayments on these securities during the six months ended June 30, 2026.

Loans Held for Sale. Loans held for sale decreased $21.3 million, or 34.9%, from $61.0 million at December 31, 2025 to $39.7 million at June 30, 2026 as the Bank's commercial real estate subsidiary, Oakmont Commercial, LLC, originated $28.2 million of commercial real estate loans during the six months ended June 30, 2026 and sold $47.6 million of loans in the secondary market during this same period. The Bank's mortgage banking subsidiary, Quaint Oak Mortgage, LLC, originated $48.9 million of one-to-four family residential loans during the six months ended June 30, 2026 and sold $49.2 million of loans in the secondary market. During the six months ended June 30, 2026, the Bank originated $16.4 million of SBA loans and sold $16.2 million of SBA loans in the secondary market during the same period. Due to the timing of disbursements, SBA loans may or may not be classified as held for sale at origination. As of December 31, 2025, the Bank reclassified $1.8 million of undisbursed SBA loans out of loans held for sale into the portfolio of loans receivable.

Loans Receivable, Net. Loans receivable, net, decreased $19.3 million, or 3.6%, to $521.4 million at June 30, 2026 from $540.7 million December 31, 2025. The largest decreases within the loan portfolio occurred in commercial business loans, which decreased $12.7 million, or 13.2%, commercial real estate loans, which decreased $6.5 million, or 2.1%, multi-family residential loans, which decreased $4.6 million, or 11.2%, one-to-four family non-owner occupied loans, which decreased $1.6 million, or 5.5%, and home equity loans, which decreased $349,000, or 6.5%. Partially offsetting these decreases were increases in one-to-four family owner occupied loans of $2.0 million, or 4.8%, and construction loans of $4.7 million, or 20.0%.

The following table summarizes the industry concentrations within the multi-family and commercial real estate portfolios:

		June 30, 2026				December 31, 2025
		(in Thousands)
Real estate rental and leasing		$	111,794			$	126,316
Accommodation and food services			34,752				33,665
Health care and social assistance			34,341				37,681
Construction			28,267				28,131
Manufacturing			22,186				22,404
Other services (except public administration)			18,640				21,558
Arts, entertainment, and recreation			15,594				14,354
Retail trade			14,457				16,340
Wholesale trade			13,986				14,166
Administrative and support and waste services			13,485				9,516
Finance and insurance			10,570				9,106
Professional, scientific and technical services			6,908				7,297
Transportation and warehousing			4,475				4,202
Other			9,963				5,781
Total		$	339,418			$	350,517

The commercial real estate and multi-family portfolios consist of 61% owner occupied commercial real estate loans and 39% non-owner occupied commercial real estate and multi-family loans as of June 30, 2026.

The following table summarizes the non-owner occupied multi-family and commercial real estate portfolios and the percent of total loans receivable, net.

		June 30, 2026								December 31, 2025
		Balance				Percent of Total Loans Receivable, net				Balance				Percent of Total Loans Receivable, net
		(Dollars in Thousands)
Real estate rental and leasing		$	100,326				19.2	%		$	115,747				21.4	%
Construction			10,839				2.1				11,002				2.0
Finance and insurance			4,706				0.9				4,792				0.9
Other services (except public administration)			3,977				0.8				4,135				0.8
Arts, entertainment, and recreation			3,580				0.7				3,069				0.6
Other			8,965				1.7				11,112				2.0
Total		$	132,393				25.4	%		$	149,857				27.7	%

The following table summarizes the non-owner occupied multi-family and commercial real estate rental and leasing loan portfolio outstanding balance, total collateral and loan to value ("LTV") ratio by geographic location:

		June 30, 2026												December 31, 2025
		Balance				Total Collateral				Weighted Average LTV				Balance				Total Collateral				Weighted Average LTV
		(Dollars in Thousands)
Pennsylvania (1)		$	33,972			$	64,850				52.4	%		$	38,515			$	78,601				49.0	%
Philadelphia			27,031				58,553				46.2				36,598				76,095				48.1
Delaware			14,989				32,125				46.7				15,187				32,125				47.3
New Jersey			8,929				18,467				48.4				9,156				19,145				47.8
Ohio			6,619				10,100				65.5				6,719				10,100				66.5
Other			8,786				17,470				50.3				9,572				16,430				58.3
Total		$	100,326			$	201,565				49.8	%		$	115,747			$	232,496				49.8	%

________________________

(1)

Pennsylvania excluding Philadelphia.

The following table summarizes the non-owner occupied multi-family and commercial real estate construction loan portfolio outstanding balance, total collateral and LTV ratio by geographic location:

		June 30, 2026												December 31, 2025
		Balance				Total Collateral				Weighted Average LTV				Balance				Total Collateral				Weighted Average LTV
		(Dollars in Thousands)
Pennsylvania (1)		$	6,255			$	11,567				54.1	%		$	6,351			$	11,567				54.9	%
Philadelphia			4,584				9,685				47.3				4,651				9,685				48.0
Total		$	10,839			$	21,252				51.0	%		$	11,002			$	21,252				51.8	%

________________________

(1)

Pennsylvania excluding Philadelphia

Deposits. Total deposits decreased $46.5 million, or 7.8%, to $550.8 million at June 30, 2026 from $597.3 million at December 31, 2025, due to the change in amortized debt issuance costs. The decrease in deposits was primarily attributable to a decrease of $28.4 million, or 26.8%, in interest-bearing checking accounts, a decrease of $24.4 million, or 6.9%, in certificates of deposit, a decrease of $1.6 million, or 2.4%, in non-interest-bearing checking accounts, and a $183,000, or 26.2%, decrease in savings accounts. These decreases in deposits were partially offset by an increase of $8.1 million, or 11.5%, in money market accounts. Both retail and non-retail interest-bearing checking account balances decreased at June 30, 2026, compared to December 31, 2025, primarily reflecting increased competition for such deposits.

The total amount of our uninsured deposits (deposits in excess of $250,000, as calculated in accordance with FDIC regulations) was $227.3 million, or 41.3% of total deposits at June 30, 2026.

Senior debt. Senior debt, net of unamortized debt issuance costs, increased $88,000 to $9.7 million at June 30, 2026 from $9.6 million at December 31, 2025, due to the change in unamortized debt issuance costs. The Company entered into a Senior Unsecured Note Purchase Agreement as of February 21, 2025 with certain institutional accredited investors pursuant to which the Company issued an aggregate of $9.75 million in aggregate principal amount of Fixed Rate Unsecured Senior Notes due March 1, 2028 (the "Senior Debt Notes") in a private placement. The Company issued to an accredited individual investor an additional $250,000 in principal amount of the Senior Debt Notes as of March 4, 2025 for a total of $10.0 million in aggregate principal amount. The Senior Debt Notes bear interest at a fixed annual rate of 11.00%, payable semi-annually in arrears on March 1 and September 1 of each year, beginning September 1, 2025. The maturity date of the Senior Debt Notes is March 1, 2028.

Subordinated debt. Subordinated debt totaled $8.0 million at both June 30, 2026 and December 31, 2025. The $8.0 million of subordinated debt matures on December 31, 2028.

Stockholders' Equity. Total stockholders' equity increased $644,000, or 1.2%, to $53.0 million at June 30, 2026 from $52.3 million at December 31, 2025. Contributing to the increase was net income for the six months ended June 30, 2026 of $647,000, amortization of stock awards and options under our stock compensation plans of $151,000, issuance of treasury stock for exercised stock options of $67,000, and the reissuance of treasury stock under the Bank's 401(k) Plan of $22,000. The increase in stockholders' equity was partially offset by dividends paid of $210,000, purchase of treasury stock of $31,000, and other comprehensive loss, net of $2,000.

Asset Quality. Non-performing loans at June 30, 2026 totaled $9.8 million, or 1.88%, of total loans receivable, net of allowance for credit losses, consisting of $8.4 million of loans on non-accrual status and $1.4 million of accruing loans 90-days or more delinquent. Non-accrual loans consist of two one-to-four family residential owner occupied loans, 18 commercial real estate loans, and 22 commercial business loans. Included in the 22 commercial business loans is one pool of equipment loans. Accruing loans 90-days or more past due include one commercial real estate loan and two commercial business loans. All non-performing loans are either well-collateralized or adequately reserved for. During the six month period ended June 30, 2026, 10 commercial business loans totaling $392,000 that were previously on non-accrual were charged-off through the allowance for credit losses. Non-performing loans at December 31, 2025 totaled $7.3 million, or 1.36%, of total loans receivable, net of allowance for credit losses, consisting of $5.8 million of loans on non-accrual status and $1.5 million of accruing loans 90-days or more delinquent. Non-accrual loans consisted of two one-to-four family residential owner occupied loans, 14 commercial real estate loans, and 15 commercial business loans. Included in the 15 commercial business loans is one pool of equipment loans. Accruing loans 90-days or more past due included one one-to-four family residential owner occupied loan, one one-to-four family residential non-owner occupied loan, one commercial real estate loan, and one commercial business loan. During the year ended December 31, 2025, one commercial real estate loan and 11 commercial business loans totaling $1.6 million that were previously on non-accrual were charged-off through the allowance for credit losses.

Comparison of Operating Results for the Three Months Ended June 30, 2026 and 2025

General. Net income amounted to $481,000 for the three months ended June 30, 2026, an increase of $209,000, or 76.8%, compared to net income of $272,000 for the three months ended June 30, 2025. The increase in net income over the comparable quarterly period was primarily the result of a decrease in interest expense of $760,000 and an increase in non-interest income of $361,000, partially offset by a decrease in interest and dividend income of $694,000, an increase in non-interest expense of $112,000, a net increase in the provision for credit losses of $63,000, and an increase in the provision for income taxes of $43,000.

Net Interest Income. Net interest income increased $66,000, or 1.5% to $4.6 million for the three months ended June 30, 2026 from $4.5 million for the three months ended June 30, 2025. The increase was driven by a $760,000, or 13.4%, decrease in interest expense, partially offset by a $694,000, or 6.8%, decrease in interest and dividend income.

Interest and Dividend Income. The $694,000, or 6.8%, decrease in interest and dividend income for the three months ended June 30, 2026 was primarily due to a $17.3 million decrease in the average balance of loans receivable, which decreased from $589.4 million for the three months ended June 30, 2025 to $572.1 million for the three months ended June 30, 2026 and had the effect of decreasing interest income by $284,000, and a 203 basis point decrease in the average yield on due from banks - interest earning, which decreased from 4.21% for the three months ended June 30, 2025 to 2.18% for the three months ended June 30, 2026 and had the effect of decreasing interest income $258,000. Also contributing to the decrease in interest income was a 15 basis point decrease in the average yield on loans receivable, which decreased from 6.58% for the three months ended June 30, 2025 to 6.43% for the three months ended June 30, 2026 and had the effect of decreasing interest income $210,000. Partially offsetting the decrease in interest and dividend income was a $14.0 million increase in the average balance of due from banks - interest earning, which increased from $37.7 million for the three months ended June 30, 2025 to $50.8 million for the three months ended June 30, 2026, and had the effect of increasing interest income $147,000.

Interest Expense. The $760,000, or 13.4%, decrease in interest expense for the three months ended June 30, 2026 over the comparable period in 2025 was driven by a $648,000, or 100.0%, decrease in interest expense on Federal Home Loan Bank ("FHLB") borrowings, which was attributable to a decrease in the average balance of FHLB borrowings which decreased from $56.3 million for the three months ended June 30, 2025, to none for the three months ended June 30, 2026, a $70.6 million decrease in the average balance of money market deposits which decreased from $142.9 million for the three months ended June 30, 2025 to $72.3 million for the three months ended June 30, 2026 and had the effect of decreasing interest expense by $627,000, a 27 basis point decrease in the average rate of certificates of deposit from 4.27% for the three months ended June 30, 2025 to 4.00% for the three months ended June 30, 2026, which had the effect of decreasing interest expense by $227,000, and a 102 basis point decrease in the average rate of money markets from 3.56% for the three months ended June 30, 2025 to 2.54% for the three months ended June 30, 2026, which had the effect of decreasing interest expense by $182,000. These decreases in interest expense were partially offset by a $57.9 million increase in the average balance of business checking accounts, which increased from $10.7 million for the three months ended June 30, 2025, to $67.9 million for the three months ended June 30, 2026 and had the effect of increasing interest expense by $496,000, a $36.3 million increase in the average balance of certificates of deposit which increased from $305.8 million for the three months ended June 30, 2025 to $342.1 million for the three months ended June 30, 2026 and had the effect of increasing interest expense by $387,000. The average interest rate spread decreased from 2.19% for the three months ended June 30, 2025 to 2.14% for the three months ended June 30, 2026 and the net interest margin increased from 2.85% for the three months ended June 30, 2025 to 2.93% for the three months ended June 30, 2026.

Average Balances, Net Interest Income, Yields Earned and Rates Paid. The following table shows for the periods indicated the total dollar amount of interest from average interest-earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates, and the net interest margin. All average balances are based on daily balances.

		Three Months Ended June 30,
		2026												2025
		Average Balance				Interest				Average Yield/ Rate				Average Balance				Interest				Average Yield/ Rate
		(Dollars in thousands)
Interest-earning assets:
Due from banks, interest-earning		$	50,819			$	277				2.18	%		$	37,731			$	397				4.21	%
Investment in interest-earning time deposits			996				10				4.02				912				26				11.40
Investment securities available for sale			681				10				5.87				1,366				31				9.08
Loans receivable, net (1) (2)			572,144				9,200				6.43				589,433				9,695				6.58
Investment in FHLB stock			291				3				4.12				2,618				45				6.88
Total interest-earning assets			624,931				9,500				6.08	%			632,060				10,194				6.45	%
Non-interest-earning assets			18,525												18,772
Total assets		$	643,456												650,832
Interest-bearing liabilities:
Savings accounts		$	547			$	-				0.00	%		$	559			$	-				0.00	%
Money market accounts			72,313				460				2.54				142,880				1,270				3.56
Checking accounts			67,875				608				3.58				10,714				66				2.46
Certificate of deposit accounts			342,114				3,424				4.00				305,769				3,262				4.27
Total deposits			482,849				4,492				3.72				459,922				4,598				4.00
FHLB borrowings			-				-				-				56,308				648				4.60
Subordinated debt			8,000				156				7.80				8,000				168				8.40
Senior debt			9,681				281				11.61				9,506				275				11.57
Total interest-bearing liabilities			500,530				4,929				3.94	%			533,736				5,689				4.26	%
Non-interest-bearing liabilities			89,955												64,969
Total liabilities			590,485												598,705
Stockholders' Equity			52,971												52,127
Total liabilities and Stockholders' Equity		$	643,456											$	650,832
Net interest-earning assets		$	124,401											$	98,324
Net interest income; average interest rate spread						$	4,571				2.14	%						$	4,505				2.19	%
Net interest margin (3)											2.93	%											2.85	%
Average interest-earning assets to average interest-bearing liabilities											124.85	%											118.42	%

________________________

(1) Includes loans held for sale.

(2) Includes non-accrual loans during the respective periods. Calculated net of deferred fees and discounts, loans in process and allowance for credit losses.

(3) Equals net interest income divided by average interest-earning assets.

Provision for Credit Losses. The $63,000, or 14.4%, net increase in the provision for credit losses for the three months ended June 30, 2026 over the comparable period in 2025 was primarily due to an increase in the balance of individually evaluated loans and their associated reserve during the period.

Non-Interest Income. The $361,000, or 18.5%, increase in non-interest income for the three months ended June 30, 2026 over the comparable period in 2025 was primarily attributable to a $404,000, or 38.6%, increase in net gain on sale of mortgage and Oakmont Commercial loans, a $136,000 increase in loan servicing income, and a $21,000, or 17.6%, increase in other fees and services charges, net. These increases were partially offset by a $97,000, or 19.0%, decrease in gain on sale of SBA loans, an $86,000, or 30.7%, decrease in mortgage banking and title abstract fees, and a $20,000, or 10.2%, decrease in insurance commissions. The increase in loan servicing income reflects the retention of servicing on certain loan sales during the 2026 period.

Non-Interest Expense. The $112,000, or 2.0%, increase in non-interest expense for the three months ended June 30, 2026 over the comparable period in 2025 was primarily due to a $182,000, or 5.0%, increase in salaries and employee benefits expense, a $119,000, or 68.4%, increase in professional fees, a $40,000, or 14.3%, increase in other expense, and a $16,000, or 11.9%, increase in FDIC deposit insurance assessment. These increases in non-interest expense were partially offset by a $119,000, or 27.1%, decrease in data processing expense, a $75,000, or 115.4%, decrease in directors' fees and expenses, a $39,000, or 9.0% decrease in occupancy and equipment expenses, a $9,000, or 9.0%, decrease in advertising expense, and a $3,000, or 1.2%, decrease in software as a service ("SaaS") subscription expense. The increase in professional fees during the quarter was primarily due to international correspondent banking compliance related activities as the Bank is continuing to build out this line of business. The decrease in directors' fees and expenses reflects a one-time adjustment based on a reassessment of the director fee accrual at June 30, 2026.

Provision for Income Tax. The provision for income tax increased $43,000 from $210,000 for the three months ended June 30, 2025 to $253,000 for the three months ended June 30, 2026, primarily due to an increase in pre-tax income.

Comparison of Operating Results for the Six Months Ended June 30, 2026 and 2025

General. Net income amounted to $647,000 for the six months ended June 30, 2026, an increase of $458,000, or 242.3%, compared to net income of $189,000 for the six months ended June 30, 2025. The increase in net income on a comparative six-month basis was primarily the result of a decrease in interest expense of $1.3 million, a net decrease in the provision for credit losses of $282,000, and an increase in non-interest income of $414,000, partially offset by a decrease in interest and dividend income of $725,000, an increase in non-interest expense of $692,000, and an increase in the provision for income taxes of $161,000.

Net Interest Income. Net interest income increased $615,000, or 7.1% to $9.3 million for the six months ended June 30, 2026 from $8.6 million for the six months ended June 30, 2025. The increase was driven by a $1.3 million, or 11.7%, decrease in interest expense, partially offset by a $725,000, or 3.6%, decrease in interest and dividend income.

Interest and Dividend Income. The $725,000, or 3.6%, decrease in interest and dividend income for the six months ended June 30, 2026 over the comparable period in 2025 was primarily due to an $8.6 million decrease in the average balance of loans receivable, which decreased from $589.1 million for the six months ended June 30, 2025 to $580.5 million for the six months ended June 30, 2026, and had the effect of decreasing interest income $280,000, an 73 basis point decrease in the average yield on due from banks - interest earning, which decreased from 4.03% for the six months ended June 30, 2025 to 3.30% for the six months ended June 30, 2026 and had the effect of decreasing interest income $130,000. Also contributing to the decrease in interest and dividend income for the period was a five basis point decrease in the average yield on loans receivable, which decreased from 6.53% for the six months ended June 30, 2025 to 6.48% for the six months ended June 30, 2026 and had the effect of decreasing interest income $121,000, and a $6.9 million decrease in the average balance of due from banks - interest earning, which decreased from $37.1 million for the six months ended June 30, 2025 to $30.2 million for the six months ended June 30, 2026, and had the effect of decreasing interest income $120,000.

Interest Expense. The $1.3 million, or 11.7%, decrease in interest expense for the six months ended June 30, 2026 over the comparable period in 2025 was driven by a $78.4 million decrease in the average balance of money market deposits which decreased from $151.1 million for the six months ended June 30, 2025 to $72.7 million for the six months ended June 30, 2026 and had the effect of decreasing interest expense by $1.4 million, a $1.1 million, or 100.0% decrease in interest on FHLB borrowings, which was attributable to a decrease in the average balance of FHLB borrowings which decreased from $50.7 million for the six months ended June 30, 2025, to none for the six months ended June 30, 2026, a 27 basis point decrease in the average rate of certificates of deposit from 4.24% for the six months ended June 30, 2025 to 3.97% for the six months ended June 30, 2026, which had the effect of decreasing interest expense by $477,000, and a 114 basis point decrease in the average rate of money markets from 3.58% for the six months ended June 30, 2025 to 2.44% for the six months ended June 30, 2026, which had the effect of decreasing interest expense by $416,000. These decreases in interest expense were partially offset by a $54.2 million increase in the average balance of certificates of deposit which increased from $295.3 million for the six months ended June 30, 2025 to $349.6 million for the six months ended June 30, 2026 and had the effect of increasing interest expense by $1.2 million, a $60.2 million increase in the average balance of business checking accounts, which increased from $19.4 million for the six months ended June 30, 2025, to $79.6 million for the six months ended June 30, 2026 and had the effect of increasing interest expense by $1.1 million. The average interest rate spread increased from 2.13% for the six months ended June 30, 2025 to 2.43% for the six months ended June 30, 2026 and the net interest margin increased from 2.74% for the six months ended June 30, 2025 to 3.02% for the six months ended June 30, 2026.

Average Balances, Net Interest Income, Yields Earned and Rates Paid. The following table shows for the periods indicated the total dollar amount of interest from average interest-earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates, and the net interest margin. All average balances are based on daily balances.

		Six Months Ended June 30,
		2026												2025
		Average Balance				Interest				Average Yield/ Rate				Average Balance				Interest				Average Yield/ Rate
		(Dollars in thousands)
Interest-earning assets:
Due from banks, interest-earning		$	30,215			$	498				3.30	%		$	37,095			$	747				4.03	%
Investment in interest-earning time deposits			954				18				3.77				912				35				7.68
Investment securities available for sale			754				37				9.81				1,479				64				8.65
Loans receivable, net (1) (2)			580,486				18,817				6.48				589,055				19,218				6.53
Investment in FHLB stock			291				25				17.18				2,458				56				4.56
Total interest-earning assets			612,700				19,395				6.34	%			630,999				20,120				6.38	%
Non-interest-earning assets			19,047												18,954
Total assets		$	631,747											$	649,953
Interest-bearing liabilities:
Savings accounts		$	589			$	1				0.34	%		$	505			$	1				0.40	%
Money market accounts			72,690				887				2.44				151,107				2,708				3.58
Checking accounts			79,595				1,438				3.61				19,444				354				3.64
Certificate of deposit accounts			349,555				6,938				3.97				295,337				6,265				4.24
Total deposits			502,429				9,264				3.69				466,393				9,328				4.00
FHLB borrowings			-				-				-				50,667				1,132				4.47
FRB borrowings			-				-				-				25				1				8.00
Subordinated debt			8,000				309				7.73				13,271				619				9.34
Senior debt			9,658				558				11.56				9,607				391				8.14
Total interest-bearing liabilities			520,087				10,131				3.90	%			539,963				11,471				4.25	%
Non-interest-bearing liabilities			59,192												57,679
Total liabilities			579,279												597,642
Stockholders' Equity			52,468												52,311
Total liabilities and Stockholders' Equity		$	631,747											$	649,953
Net interest-earning assets		$	92,613											$	91,036
Net interest income; average interest rate spread						$	9,264				2.44	%						$	8,649				2.13	%
Net interest margin (3)											3.02	%											2.74	%
Average interest-earning assets to average interest-bearing liabilities											117.81	%											116.86	%

________________________

(1) Includes loans held for sale.

(2) Includes non-accrual loans during the respective periods. Calculated net of deferred fees and discounts, loans in process and allowance for credit losses.

(3) Equals net interest income divided by average interest-earning assets.

Provision for Credit Losses. The $282,000, or 32.1%, net decrease in the provision for credit losses for the six months ended June 30, 2026 over the six months ended June 30, 2025 was primarily due to a decrease in charge-offs and a decrease in the commercial and industrial loan balances, during the six months ended June 30, 2026.

Non-Interest Income. The $414,000, or 11.2%, increase in non-interest income for the six months ended June 30, 2026 over the comparable period in 2025 was primarily attributable to a $413,000, or 50.5%, increase in gain on sale of SBA loans, a $336,000, or 16.0%, increase in net gain on sale of mortgage and Oakmont Commercial loans, and a $219,000 increase in loan servicing income. These increases were partially offset by a $396,000, or 455.2%, decrease in other fees and services charges, net, a $141,000, or 33.1%, decrease in mortgage banking and title abstract fees, and a $23,000, or 6.0%, decrease in insurance commissions. Other fees and services charges, net declined primarily due to SBA lending-related items, including a $152,000 write-down of the SBA servicing asset due to a valuation adjustment and the write-off of $199,000 of certain deferred SBA loan origination costs associated with SBA loan sales completed during the period. Additionally, loan servicing income increased, reflecting the retention of servicing on certain loan sales during the 2026 period.

Non-Interest Expense. The $692,000, or 6.2%, increase in non-interest expense for the six months ended June 30, 2026 over the comparable period in 2025 was primarily due to a $531,000, or 7.3%, increase in salaries and employee benefits expense, a $245,000, or 61.7% increase in professional fees, a $98,000, or 20.7%, increase in SaaS subscription expense, a $69,000, or 11.5% increase in other expense, and a $60,000, or 23.4%, increase in FDIC deposit insurance assessment. These increases in non-interest expense were partially offset by a $182,000, or 21.6%, decrease in data processing expense, a $72,000, or 55.4%, decrease in directors' fees and expenses, a $40,000, or 4.6%, decrease in occupancy and equipment expenses, and a $17,000, or 8.5%, decrease in advertising expense. The increase in salaries and employee benefits expense was primarily due to a $233,000 increase in salaries, and a $240,000 increase in bonus expense due to a voluntary reduction in discretionary incentive compensation driven by lower performance results for the six months ended June 30, 2025. The increase in professional fees during the period was primarily due to international correspondent banking compliance-related activities as the Bank continues to build out this line of business. The increase in SaaS subscription expense reflects the phased implementation and expanded utilization of third-party software solutions supporting compliance, risk management, and operational infrastructure, partially offset by reductions in traditional data processing costs. The decrease in directors' fees and expenses reflects a one-time adjustment based on a reassessment of the director fee accrual at June 30, 2026.

Provision for Income Tax. The provision for income tax increased $161,000, or 75.9%, from $212,000 for the six months ended June 30, 2025 to $373,000 for the six months ended June 30, 2026 due primarily to an increase in pre-tax income.

Operating Segments

The Company's operations consist of two reportable operating segments: Banking and Oakmont Commercial. Our Banking Segment generates revenues primarily from its lending, deposit gathering and fee business activities. Our Oakmont Commercial Segment originates commercial real estate loans which are sold into the secondary market generally along with the loans' servicing rights. The profitability of this segment's operations depends primarily on the gains realized from the sale of loans, processing fees, and service fees. Detailed segment information appears in Note 11 in the Notes to Unaudited Consolidated Financial Statements.

Our Banking Segment reported a pre-tax segment loss ("PTSL") for the three months ended June 30, 2026 of $232,000, a $239,000 increase in PTSL from the same period in 2025. This increase in PTSL was primarily due to a $336,000, or 21.6%, decrease in non-interest income, a $63,000, or 14.4%, increase in the provision for credit losses, and a $27,000, or 0.5%, increase in non-interest expense. This increase in PTSL was partially offset by a $244,000, or 5.9%, increase in net interest income. The decrease in non-interest income is primarily attributable to a $145,000, or 22.0%, decrease in the net gain on sale of mortgage loans, a $127,000 decrease in other fees and service charges, net, a $97,000, or 19.0%, decrease in gain on sale of SBA loans, and an $86,000, or 30.7%, decrease in mortgage banking and title abstract fees, partially offset by a $136,000 increase in net loan servicing income. The increase in non-interest expense was primarily due to a $119,000, or 74.8%, increase in professional fees expense, and a $115,000, or 3.4%, increase in salaries and employee benefits expense, partially offset by a $119,000, or 27.1%, decrease in data processing expense and a $75,000, or 115.4%, decrease in directors' fees and expenses.

Our Oakmont Commercial, LLC Segment reported a pre-tax segment profit ("PTSP") for the three months ended June 30, 2026 of $966,000, a $491,000, or 103.4%, increase from the same period in 2025. The increase in PTSP was primarily due to a $697,000, or 178.8%, increase in non-interest income, partially offset by a $121,000, or 31.6%, decrease in net interest income and an $85,000, or 28.6%, increase in non-interest expense. The increase in non-interest income was due to a $549,000, or 141.5%, increase in net gain on sale of loans, and a $148,000 increase in other fees and services charges, net. The increase in non-interest expense was primarily due to a $67,000, or 25.0%, increase in salaries and employee benefits expense, and a $14,000, or 200.0%, increase in other non-interest expense.

Our Banking Segment reported a pre-tax segment loss ("PTSL") for the six months ended June 30, 2026 of $720,000, a $92,000, or 14.6%, increase in PTSL from the same period in 2025. This increase in PTSL was primarily due to a $640,000, or 6.2%, increase in non-interest expense, and a $396,000, or 15.2%, decrease in non-interest income. This increase in PTSL was partially offset by a $662,000, or 8.3%, decrease in net interest income, and a $282,000, or 32.1%, decrease in the provision for credit losses. The increase in non-interest expense was primarily due to a $503,000, or 7.6%, increase in salaries and employee benefits expense, a $98,000, or 20.7%, increase in SaaS subscription expense, a $245,000, or 66.8%, increase in professional fees expense, and a $60,000, or 23.5%, increase in FDIC deposit insurance assessment, partially offset by a $182,000, or 21.6%, decrease in data processing expense, and a $72,000, or 55.3%, decrease in directors' fees and expense. The decrease in non-interest income is primarily attributable to a $650,000 decrease in other fees and service charges, net, a $220,000, or 22.0%, decrease in the net gain on sale of mortgage loans, and a $141,000, or 33.1%, decrease in mortgage banking and title abstract fees, partially offset by a $413,000, or 50.5%, increase in gain on sale of SBA loans, and a $219,000 increase in net loan servicing fee income.

Our Oakmont Commercial, LLC Segment reported a pre-tax segment profit ("PTSP") for the six months ended June 30, 2026 of $1.7 million, a $711,000, or 69.1%, increase from the same period in 2025. The increase in PTSP was primarily due to a $810,000, or 73.3%, increase in non-interest income, partially offset by a $52,000, or 7.3%, increase in non-interest expense, and a $47,000, or 7.4%, decrease in net interest income. The increase in non-interest income was due to $556,000, or 50.5%, increase in net gain on sale of loans, and a $254,000 increase in other fees and service charges, net. The increase in non-interest expense was primarily due to a $28,000, or 4.3%, decrease in salaries and employee benefits expense, and a $20,000, or 117.6%, increase in other non-interest expense.

Liquidity and Capital Resources

The Company's primary sources of funds are deposits, amortization and prepayment of loans and to a lesser extent, loan sales and other funds provided from operations. While scheduled principal and interest payments on loans are a relatively predictable source of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions and competition. The Company sets the interest rates on its deposits to maintain a desired level of total deposits. Borrowings may also be used on a short-term basis to compensate for reductions in the availability of funds from other sources and on a longer-term basis for general business purposes. In addition, the Company invests excess funds in short-term interest-earning assets that provide additional liquidity. At June 30, 2026, the Company's cash and cash equivalents amounted to $48.3 million.

The Company uses its liquidity to fund existing and future loan commitments, to fund deposit outflows, to invest in other interest-earning assets and to meet operating expenses. At June 30, 2026, Quaint Oak Bank had outstanding commitments to originate loans of $12.3 million, commitments under unused lines of credit of $42.1 million, and $1.0 million under standby letters of credit.

At June 30, 2026, certificates of deposit scheduled to mature in one year or less totaled $233.9 million. Based on prior experience, management believes that a significant portion of such deposits will remain with us, although there can be no assurance that this will be the case.

In addition to cash flow from loan payments and prepayments and deposits, the Company has significant borrowing capacity available to fund liquidity needs. If the Company requires funds beyond its ability to generate them internally, borrowing agreements exist with the Federal Home Loan Bank of Pittsburgh (FHLB), which provide an additional source of funds. As of June 30, 2026, we had no outstanding borrowings from the FHLB and had $215.3 million in borrowing capacity. Under terms of the collateral agreement with the FHLB of Pittsburgh, we pledge residential mortgage loans as well as Quaint Oak Bank's FHLB stock as collateral for such advances. In addition, as of June 30, 2026, Quaint Oak Bank had $23.4 million in borrowing capacity with the Federal Reserve Bank of Philadelphia. We also use brokered deposits as a funding source. As of June 30, 2026, the Company had $85.2 million of brokered deposits, $35.1 million of which were sourced from one brokered interest-bearing checking account deposit relationship.

The Company identified one major interest bearing brokered checking deposit customer that accounted for approximately 6.4% of total deposits at June 30, 2026. The outstanding balance of the major deposit customers' interest bearing brokered checking account totaled approximately $35.1 million at June 30, 2026. If these deposits were to be withdrawn in whole or in part, replacement of the funds may require us to pay higher interest rates on retail deposits or brokered deposits which would have an adverse effect on our net interest income and net income. The replacement of these deposits with other sources of funding such as borrowings could also increase our overall cost of funds and would negatively impact our results of operations. The Company has significant borrowing capacity available to fund liquidity needs, including borrowing agreements with the Federal Home Loan Bank of Pittsburgh and the Federal Reserve Bank of Philadelphia described above.

Any requirements that we increase our capital ratios or liquidity could require our seeking additional sources of capital through a capital raise that would necessitate issuing additional securities, which could dilute our outstanding shares of our common stock. We may also raise capital through the issuance of preferred stock and senior or subordinated debt, or liquidate certain assets, perhaps on terms that are unfavorable to us or contrary to our business plan.

The Company and Quaint Oak Bank are subject to the regulation and supervision of the Board of Governors of the Federal Reserve System (the "FRB"), the Federal Deposit Insurance Corporation ("FDIC") and the Pennsylvania Department of Banking and Securities, each of which may impose restrictions on our ability to pay dividends, repurchase shares or incur additional indebtedness. As the subsidiary of a stock saving and loan holding company, Quaint Oak must file a notice with the appropriate Federal Reserve Bank at least 20 days before a proposed declaration of a dividend to the Company. Under applicable banking regulations, Quaint Oak Bank must file an application for FDIC approval of a capital distribution if: the total capital distributions for the calendar year exceed the sum of Quaint Oak Bank's net income for that year to date plus the retained net income for the preceding two years; Quaint Oak Bank would not be at least adequately capitalized following the distribution; the distribution would violate any applicable statute, regulation, agreement or FDIC-imposed condition; or Quaint Oak Bank is not otherwise eligible for expedited treatment of its filings with the FDIC. The inability to pay dividends from Quaint Oak Bank to the Company could negatively impact our ability to pay dividends to shareholders, pay interest on our debt or engage in stock repurchases. The Company currently is restricted in declaring or paying dividends, engaging in share repurchases or directly or indirectly, incurring, increasing, or guaranteeing any debt, including any interest payments due on subordinated debentures, without the prior written approval of the FRB. To date, the FRB has approved all requests to pay dividends and interest on subordinated debt, however, no assurance can be given that such approvals will be received in the future.

The following table summarizes the Company's primary and secondary sources of liquidity which were available at June 30, 2026 (dollars in thousands).

		June 30, 2026
		(Dollars in thousands)
Cash and cash equivalents		$	48,262
Unpledged investment securities, amortized cost			608
FHLB advance availability			215,279
Federal Reserve discount window availability			23,371
Total primary and secondary sources of available liquidity		$	287,520

Quaint Oak Bank is required to maintain regulatory capital sufficient to meet tier 1 leverage, common equity tier 1 capital, tier 1 risk-based and total risk-based capital ratios of at least 4.00%, 4.50%, 6.00%, and 8.00%, respectively. At June 30, 2026, Quaint Oak Bank exceeded each of its capital requirements with ratios of 10.91%, 13.60%, 13.60% and 14.85%, respectively. As a small savings and loan holding company eligible for exemption, the Company is not currently subject to any regulatory capital requirements.

Off-Balance Sheet Arrangements

In the normal course of operations, we engage in a variety of financial transactions that, in accordance with generally accepted accounting principles are not recorded in our financial statements. These transactions involve, to varying degrees, elements of credit, interest rate, and liquidity risk. Such transactions are used primarily to manage customers' requests for funding and take the form of loan commitments and lines of credit. Our exposure to credit loss from non-performance by the other party to the above-mentioned financial instruments is represented by the contractual amount of those instruments. We use the same credit policies in making commitments and conditional obligations as we do for on-balance sheet instruments. In general, we do not require collateral or other security to support financial instruments with off-balance sheet credit risk.

Commitments. At June 30, 2026, we had unfunded commitments under lines of credit of $42.1 million, $12.3 million of commitments to originate loans, and $1.0 million under standby letters of credit. We had no commitments to advance additional amounts pursuant to outstanding lines of credit or undisbursed construction loans.

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 balance of off balance sheet credit exposures was $265,000 at June 30, 2026, and $277,000 at December 31, 2025.

Impact of Inflation and Changing Prices

The consolidated financial statements and related financial data presented herein have been prepared in accordance with accounting principles generally accepted in the United States of America which generally require the measurement of financial position and operating results in terms of historical dollars, without considering changes in relative purchasing power over time due to inflation. Unlike most industrial companies, virtually all of the Company's assets and liabilities are monetary in nature. As a result, interest rates generally have a more significant impact on the Company's performance than does the effect of inflation. Interest rates do not necessarily move in the same direction or in the same magnitude as the prices of goods and services, since such prices are affected by inflation to a larger extent than interest rates.