SOUTHAMPTON, PA — Quaint Oak Bancorp, Inc. (OTCQB: QNTO) reported a sharp improvement in second-quarter earnings as the community-focused financial services company worked to stabilize operations, reduce interest expense, and boost non-interest income through increased loan sales. Net income for the quarter ended June 30, 2025 rose to $272,000, or $0.10 per share, more than doubling the $100,000, or $0.04 per share, recorded in the same period last year.
For the first six months of 2025, however, earnings were significantly lower at $189,000, or $0.07 per share, compared to $973,000, or $0.39 per share, for the first half of 2024. The year-to-date decline was primarily driven by a drop in interest income, higher operating costs, and lower earnings from discontinued operations.
Strategic Cost Management, Lending Activity Drive Quarterly Rebound
CEO Robert T. Strong acknowledged the challenging environment but said the second quarter marked a turning point. “I am pleased to report that our earnings for the second quarter were measurably improved over the prior quarter,” Strong said. He noted the company expects to incur some one-time costs in the second half of the year related to finalizing the buildout of its business lines but believes core expenses have stabilized.
The quarter’s performance benefited from a $1.1 million decrease in interest expense, driven largely by lower costs on deposits and subordinated debt. Non-interest income also climbed sharply, up $643,000, or 49.3%, supported by stronger gains on the sale of SBA and residential mortgage loans.
Meanwhile, interest income declined by $703,000 year over year, impacted by lower balances in interest-earning bank deposits and net loans receivable. Still, higher yields on the remaining loan portfolio helped offset some of the decline. The bank’s net interest margin improved from 2.28% to 2.85%, and the interest rate spread widened to 2.19%.
Quaint Oak also increased its provision for credit losses by $478,000 in the second quarter, reflecting higher charge-offs during the period.
First-Half Results Reflect Broader Headwinds
For the first six months of 2025, net income fell sharply due to a $2.9 million decline in interest and dividend income, combined with a $716,000 increase in non-interest expenses and reduced income from discontinued operations. Despite these pressures, the company reported meaningful gains in non-interest income and managed a $2.1 million cut in interest expense.
Non-interest income for the half-year rose by $821,000, fueled by a 544% increase in gain on sale of SBA loans and a 40.6% rise in gain on sale of other loans. However, fee income and real estate commissions declined due to lower correspondent banking activity.
Operating expenses were driven higher by increases in data processing, occupancy, and professional services, partially offset by lower salaries and FDIC insurance costs.
Asset Quality and Balance Sheet Trends
As of June 30, 2025, Quaint Oak reported total assets of $670.8 million, down 2.1% from year-end 2024. The decline was primarily due to lower balances in cash, loans held for sale, and investment securities. Total loans receivable, net of allowance for credit losses, rose by $7.0 million during the period, with growth in owner-occupied residential, home equity, construction, and commercial real estate loans.
Deposits fell by $21.1 million, or 3.8%, to $532.2 million, largely due to reduced money market and interest-bearing checking balances following the termination of a correspondent banking relationship. In contrast, certificates of deposit and non-interest-bearing accounts showed gains.
Quaint Oak also increased its Federal Home Loan Bank borrowings by $12.1 million and added $10 million in senior unsecured notes bearing 11% interest, maturing in 2028. The proceeds were used in part to retire $14 million in subordinated debt.
Non-performing assets showed modest improvement. As of June 30, 2025, non-performing loans totaled $5.9 million, or 1.10% of total loans receivable, down from 1.07% at the end of 2024. The Texas Ratio, a measure of credit risk, stood at 9.24%, and non-performing assets as a percentage of total assets improved to 0.89%.
Outlook Focused on Long-Term Profitability
Despite ongoing macroeconomic uncertainties, Strong signaled confidence in the company’s strategic direction. “Loan closings are more consistent while asset growth is well contained as a result of regular loan sales into a secondary market,” he said. “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.”
Quaint Oak continues to operate across Pennsylvania through its core banking operation and a suite of financial subsidiaries including mortgage, title, insurance, and commercial real estate services.
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