Company Quick10K Filing
Quick10K
Quaint Oak Bancorp
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-04-10 Regulation FD, Exhibits
8-K 2019-01-30 Earnings, Exhibits
8-K 2019-01-09 Exhibits
8-K 2018-12-27 Enter Agreement, Off-BS Arrangement, Other Events, Exhibits
8-K 2018-12-12 Regulation FD, Exhibits
8-K 2018-10-24 Earnings, Exhibits
8-K 2018-10-10 Regulation FD, Exhibits
8-K 2018-07-23 Earnings, Exhibits
8-K 2018-07-11 Regulation FD, Exhibits
8-K 2018-05-09 Shareholder Vote, Exhibits
8-K 2018-04-25 Earnings, Exhibits
8-K 2018-04-11 Regulation FD, Exhibits
8-K 2018-01-30 Earnings, Exhibits
8-K 2018-01-10 Regulation FD, Exhibits
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EARS Auris Medical Holding 12
FMFG Farmers & Merchants Bancshares 0
MTII Monitronics International 0
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QNTO 2018-12-31
Part I
Item 1. Business.
Item 1A. Risk Factors.
Item 1B. Unresolved Staff Comments.
Item 2. Properties.
Item 3. Legal Proceedings.
Item 4. Mine Safety Disclosures.
Part II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Item 6. Selected Financial Data.
Item 7. Management's Discussion and Analysis of Financial Condition and Results Of
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Item 8. Financial Statements and Supplementary Data.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Item 9A. Controls and Procedures.
Item 9B. Other Information.
Part III
Item 10. Directors and Executive Officers and Corporate Governance.
Item 11. Executive Compensation.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Part IV
Item 15. Exhibits, Financial Statement Schedules.
Item 16. Form 10-K Summary.
EX-13.0 exh130.htm
EX-21 exh21.htm
EX-23.1 exh231.htm
EX-31.1 exh311.htm
EX-31.2 exh312.htm
EX-32.0 exh320.htm

Quaint Oak Bancorp Earnings 2018-12-31

QNTO 10K Annual Report

Balance SheetIncome StatementCash Flow

10-K 1 form10k.htm FORM 10-K

 UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
 
(Mark One)
 
☒    Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended:  December 31, 2018
or
☐    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from ______ to ______
   
Commission File Number: 000-52694

QUAINT OAK BANCORP, INC.
(Exact name of Registrant as specified in its charter)

Pennsylvania

35-2293957
(State or Other Jurisdiction of

(I.R.S. Employer
Incorporation or Organization)

Identification Number)
 
 
501 Knowles Avenue, Southampton, Pennsylvania

18966
(Address of Principal Executive Offices)

(Zip Code)

Registrant's telephone number, including area code:        (215) 364-4059

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.01 par value per share
Title of Class

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.       YES  ☐     NO   ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  YES  ☐ NO  ☒
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  YES  ☒    NO  ☐
 
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  YES  ☒   NO  ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or emerging growth company.  See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer 
Accelerated filer        
 
Non-accelerated filer
Smaller reporting company
 

Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES  ☐  NO  ☒

The aggregate market value of the Common Stock held by non-affiliates of the Registrant based on a closing price of $13.35 on June 30, 2018, the last day of the Registrant's second quarter was $17,287,275 (1,990,556 shares outstanding less 695,629 shares held by affiliates at $13.35 per share).  Shares of Common Stock held by each executive officer and director and certain employee stock ownership plans have been excluded from the calculation since such persons may be deemed affiliates.  This determination of affiliate status is not necessarily a conclusive determination for other purposes.

Number of shares of Common Stock outstanding as of March 21, 2019: 1,977,228

DOCUMENTS INCORPORATED BY REFERENCE

Set forth below are the documents incorporated by reference and the part of the Form 10-K into which the document is incorporated:


(1)
Portions of the Annual Report to Shareholders for the year ended December 31, 2018 are incorporated by reference into Part II, Items 6-8 and Part IV, Item 15 of this Form 10-K.

(2)
Portions of the definitive Proxy Statement for the 2019 Annual Meeting of Shareholders are incorporated by reference into Part III, Items 10-14 of this Form 10-K.
 


QUAINT OAK BANCORP, INC.
2018 ANNUAL REPORT ON FORM 10-K
 
TABLE OF CONTENTS
 
   
Page
PART I
     
Item  1.
Business
1
     
Item 1A.
Risk Factors
29
     
Item 1B.
Unresolved Staff Comments
29
     
Item  2.
Properties
29
     
Item  3.
Legal Proceedings
29
     
Item  4.
Mine Safety Disclosures
29
PART II
     
Item  5.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
29
     
Item  6.
Selected Financial Data
30
     
Item  7.
Management's Discussion and Analysis of Financial Condition and Results of Operations
30
     
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
30
     
Item 8.
Financial Statements and Supplementary Data
30
     
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
30
     
Item 9A
Controls and Procedures
31
     
Item 9B.
Other Information
31
PART III
     
Item 10.
Directors, Executive Officers and Corporate Governance
32
     
Item 11.
Executive Compensation
32
     
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
32
     
Item 13.
Certain Relationships and Related Transactions, and Director Independence
32
     
Item 14.
Principal Accounting Fees and Services
33
PART IV
     
Item 15.
Exhibits, Financial Statement Schedules
33
     
Item 16. Form 10-K Summary 34
     
SIGNATURES 
35
 

Forward-Looking Statements

This Annual Report on Form 10-K 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 Quaint Oak Bancorp 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 Quaint Oak Bancorp 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 loan 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 Quaint Oak Bancorp 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 Quaint Oak Bancorp is or will be engaged. Quaint Oak Bancorp 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.

As used in this report the terms "we," "us," and “our” refer to Quaint Oak Bancorp, a Pennsylvania corporation, or Quaint Oak Bank, a Pennsylvania chartered savings bank and wholly owned subsidiary of Quaint Oak Bancorp, as the context requires.  In addition, unless the context otherwise requires, references to the operations of Quaint Oak Bancorp include the operations of Quaint Oak Bank and its subsidiary companies.

PART I

Item 1.  Business.

General

Quaint Oak Bancorp, Inc., a Pennsylvania corporation headquartered in Southampton, Pennsylvania, was organized in 2007 as the holding company for Quaint Oak Bank.  Quaint Oak Bank, originally incorporated in 1926, converted from a Pennsylvania chartered building and loan association to a Pennsylvania chartered mutual savings bank named Quaint Oak Savings Bank in January 2000 and converted to a stock savings bank in July 2007.  Quaint Oak Bank operates from its main office located in Bucks County, Pennsylvania and Allentown regional office located in the Lehigh Valley area of Pennsylvania and through an insurance agency subsidiary at a Chalfont, Pennsylvania location.  In February 2019, Quaint Oak Mortgage, a mortgage banking subsidiary of Quaint Bank, opened a mortgage office in Philadelphia, Pennsylvania.  Quaint Oak Bank through its subsidiary companies conducts mortgage banking, real estate sales, title abstract and insurance businesses.



1

As of December 31, 2018, Quaint Oak Bank’s primary market area includes Bucks, Montgomery and Philadelphia Counties, Pennsylvania, and the Lehigh Valley area of Pennsylvania. As of December 31, 2018, Quaint Oak Bancorp had $271.4 million of total assets, $211.9 million of deposits and $23.8 million of stockholders' equity.  Quaint Oak Bancorp’s stockholders' equity constituted 8.8% of total assets as of December 31, 2018.

Quaint Oak Bank's primary business consists of attracting deposits from the general public through a variety of deposit programs and investing such deposits principally in commercial real estate, residential, multi-family, construction, and home equity loans secured by property in our market area.   The Bank also invests in commercial business loans and to a lesser extent other consumer loans.  In addition, Quaint Oak Bank offers mortgage banking, real estate sales, title abstract and insurance services through its subsidiary companies.  Quaint Oak Bank serves its customers through its offices as well as through correspondence, telephone and on-line banking.

Deposits with Quaint Oak Bank are insured to the maximum extent provided by law through the Deposit Insurance Fund administered by the Federal Deposit Insurance Corporation ("FDIC").  Quaint Oak Bank is subject to examination and comprehensive regulation by the FDIC and the Pennsylvania Department of Banking.  Quaint Oak Bancorp, which elected to be treated as a savings and loan holding company, is subject to examination and regulation by the Board of Governors of the Federal Reserve System ("Federal Reserve Board").  Quaint Oak Bank is also a member of the Federal Home Loan Bank of Pittsburgh ("FHLB of Pittsburgh" or "FHLB"), which is one of the 12 regional banks comprising the Federal Home Loan Bank System ("FHLB System").  Quaint Oak Bank is also subject to regulations of the Federal Reserve Board governing reserves required to be maintained against deposits and certain other matters.

Quaint Oak Bancorp's principal executive offices are located at 501 Knowles Avenue, Southampton, Pennsylvania 18966, its telephone number is (215) 364-4059 and Internet address is www.quaintoak.com.

Quaint Oak Bank's Lending Activities

General.  At December 31, 2018, the net loan portfolio of Quaint Oak Bank amounted to $216.9 million, representing approximately 79.9% of its total assets at that date.  The principal lending activity of Quaint Oak Bank is the origination of commercial real estate loans and one-to-four family residential loans, and to a lesser extent, multi-family residential loans, commercial business loans, construction loans, and home equity loans.  At December 31, 2018, commercial real estate loans amounted to $103.8 million, or 47.2% of its total loan portfolio.  At December 31, 2018, one-to-four family residential loans amounted to $54.0 million or 24.6% of its total loan portfolio of which $47.4 million, or 21.6%, of the total loan portfolio consisted of non-owner occupied properties and $6.6 million, or 3.0%, of the total loan portfolio consisted of owner occupied properties. Multi-family residential loans totaled $24.0 million, or 10.9%, of the total loan portfolio at December 31, 2018.  Commercial business loans totaled $23.6 million, or 10.7%, of the total loan portfolio at December 31, 2018.  Construction loans totaled $10.0 million, or 4.6%, of the total loan portfolio at December 31, 2018.  Home equity loans totaled $4.3 million, or 2.0%, of the total loan portfolio at December 31, 2018.

The types of loans that Quaint Oak Bank may originate are subject to federal and state laws and regulations. Interest rates charged on loans are affected principally by the demand for such loans, the supply of money available for lending purposes and the rates offered by our competitors. These factors are, in turn, affected by general and economic conditions, the monetary policy of the federal government, including the Federal Reserve Board, legislative and tax policies, and governmental budgetary matters.

2

Quaint Oak Bank is subject to a regulatory loans to one borrower limit of 15% of the Bank's capital which amounts to $4.3 million at December 31, 2018.  At December 31, 2018, Quaint Oak Bank's five largest loans or groups of loans-to-one borrower, including related entities, were $3.1 million, $2.8 million, $2.8 million, $2.8 million, and $2.7 million.  The loans primarily consisted of three commercial real estate loans and two multi-family residential loans.  Each of Quaint Oak Bank's five largest loans or groups of loans was performing in accordance with its terms at December 31, 2018.

Loan Portfolio Composition.  The following table shows the composition of our loan portfolio by type of loan at the dates indicated.

   
December 31,
 
   
2018
   
2017
   
2016
   
2015
   
2014
 
   
Amount
   
%
   
Amount
   
%
   
Amount
   
%
   
Amount
   
%
   
Amount
   
%
 
   
(Dollars in Thousands)
 
Real estate loans:
                                                           
  One-to-four family residential (1):
                                                           
Owner occupied
 
$
6,603
     
3.0
%
 
$
5,681
     
2.8
%
 
$
5,389
     
3.0
%
 
$
5,777
     
4.0
%
 
$
7,085
     
5.7
%
Non-owner occupied
   
47,361
     
21.6
     
51,833
     
25.4
     
51,893
     
29.0
     
51,036
     
35.1
     
48,554
     
38.8
 
Total one-to-four
            family residential loans
   
53,964
     
24.6
     
57,514
     
28.2
     
57,282
     
32.0
     
56,813
     
39.1
     
55,639
     
44.5
 
                                                                                 
  Multi-family (five or more) residential
23,967
     
10.9
     
21,715
     
10.6
     
14,641
     
8.2
     
12,402
     
8.5
     
10,132
     
8.1
 
  Commercial real estate
   
103,819
     
47.2
     
92,234
     
45.1
     
77,730
     
43.4
     
49,765
     
34.3
     
37,146
     
29.7
 
  Construction
   
9,998
     
4.6
     
15,632
     
7.6
     
15,355
     
8.6
     
16,100
     
11.1
     
14,303
     
11.5
 
  Home equity loans
   
4,347
     
2.0
     
5,129
     
2.5
     
4,775
     
2.6
     
7,409
     
5.1
     
6,961
     
5.6
 
Total real estate loans
   
196,095
     
89.3
     
192,224
     
94.0
     
169,783
     
94.8
     
142,489
     
98.1
     
124,181
     
99.4
 
                                                                                 
Commercial business (2)
   
23,616
     
10.7
     
11,954
     
5.9
     
9,295
     
5.2
     
2,576
     
1.8
     
749
     
0.6
 
Other consumer
   
19
     
--
     
138
     
0.1
     
26
     
--
     
71
     
0.1
     
41
     
--
 
Total loans
   
219,730
     
100.0
%
   
204,316
     
100.0
%
   
179,104
     
100.0
%
   
145,136
     
100.0
%
   
124,971
     
100.0
%
Less:
                                                                               
Deferred loan fees and costs
   
(867
)
           
(837
)
           
(692
)
           
(518
)
           
(492
)
       
Allowance for loan losses
   
(1,965
)
           
(1,812
)
           
(1,605
)
           
(1,313
)
           
(1,148
)
       
Net loans
 
$
216,898
           
$
201,667
           
$
176,807
           
$
143,305
           
$
123,331
         
 ____________________
(1)
Does not include mortgage loans held for sale of $4.8 million, $6.0 million, $4.7 million, $5.1 million and $2.6 million at December 31, 2018, 2017, 2016, 2015 and 2014, respectively.
(2)
Does not include equipment loans held for sale of $258,000 and $963,000 at December 31, 2018 and 2017, respectively.

Origination of Loans.  The lending activities of Quaint Oak Bank are subject to the written underwriting standards and loan origination procedures established by the board of directors and management. New loans are generated primarily through the efforts of Quaint Oak Bank's loan officers, referrals from brokers and existing customers.  Loan applications are underwritten and processed by Quaint Oak Bank’s credit administration department.

All loans are presented to the loan committee for review.  Quaint Oak Bank's loan approval process is intended to assess the borrower's ability to repay the loan, the viability of the loan and the value of the collateral that will secure the loan.  Individual loan requests over $1.5 million, or loan requests that would increase the relationship over $1.5 million, must be approved by our President and Chief Executive Officer, Senior Vice President Business Development, and one outside loan committee member.






3

    The following table shows our total loans originated and repaid during the periods indicated.  We did not purchase any loans in 2018 or 2017. We sold $102.3 million of loans in 2018 and $85.7 million of loans in 2017.

   
Year Ended December 31,
 
   
2018
   
2017
   
2016
 
   
(In Thousands)
 
Loan originations:
                 
     One-to-four family residential owner occupied (1)
 
$
94,448
   
$
82,889
   
$
61,194
 
     One-to-four family residential non-owner occupied (2)
   
8,739
     
11,911
     
9,998
 
     Multi-family residential
   
3,125
     
6,614
     
3,441
 
     Commercial real estate
   
24,464
     
20,980
     
38,095
 
     Construction
   
6,886
     
10,240
     
12,358
 
     Home equity
   
739
     
1,479
     
573
 
     Commercial business (3)
   
17,675
     
6,857
     
6,823
 
     Other consumer
   
--
     
129
     
5
 
Total loan originations
   
156,076
     
141,099
     
132,487
 
Loans sold
   
(102,327
)
   
(85,669
)
   
(64,614
)
Loan principal repayments
   
(38,697
)
   
(27,924
)
   
(34,257
)
Total loans sold and principal repayments
   
(141,024
)
   
(113,593
)
   
(98,871
)
Decreases due to other items, net (4)
   
(1,724
)
   
(352
)
   
(466
)
Net increase in loan portfolio
 
$
13,328
   
$
27,154
   
$
33,150
 
____________________
(1)
Includes $92.0 million, $81.4 million and $60.4 million of loans originated for sale in 2018, 2017 and 2016, respectively.
(2)
Includes $5.4 million, $5.6 million, and $3.9 million of loans originated for sale in 2018, 2017 and 2016, respectively.
(3)
Includes $2.8 million and $963,000 of loans originated for sale in 2018 and 2017, respectively.
(4)
Other items consist of loans transferred to other real estate owned, deferred fees and the allowance for loan losses.

Although Pennsylvania laws and regulations permit savings banks to originate loans secured by real estate located throughout the United States, Quaint Oak Bank concentrates its lending activity in its primary market area in Bucks, Montgomery and Philadelphia Counties, Pennsylvania, and the Lehigh Valley area of Pennsylvania.

Contractual Terms to Final Maturities.  The following table shows the scheduled contractual maturities of our loans as of December 31, 2018, before giving effect to net items, and excluding loans held for sale.  Demand loans, loans having no stated schedule of repayments and no stated maturity, and overdrafts are reported as due in one year or less.  The amounts shown below do not take into account loan prepayments.

   
1-4 Family
Residential
Owner
Occupied
   
1-4 Family
Residential
Non-
Owner
Occupied
   
Multi-
Family
Residential
   
Commercial
Real Estate
   
Construction
   
Home
Equity
   
Commercial
Business and
Other
Consumer
   
Total
 
   
(In Thousands)
 
Amounts due in:
                                               
    One year or less
 
$
21
   
$
2,567
   
$
--
   
$
2,024
   
$
4,728
   
$
330
   
$
3,102
   
$
12,772
 
    After one year through three years
   
6
     
7,046
     
2,148
     
15,138
     
564
     
25
     
3,747
     
28,674
 
    After three years through five years
   
83
     
6,008
     
4,103
     
25,305
     
2,622
     
240
     
11,024
     
49,385
 
    After five years through ten years
   
157
     
10,232
     
6,622
     
31,624
     
508
     
823
     
5,083
     
55,049
 
    After ten years through 15 years
   
793
     
7,230
     
4,184
     
6,188
     
--
     
2,929
     
--
     
21,324
 
    After 15 years
   
5,543
     
14,278
     
6,910
     
23,540
     
1,576
     
--
     
679
     
52,526
 
        Total
 
$
6,603
   
$
47,361
   
$
23,967
   
$
103,819
   
$
9,998
   
$
4,347
   
$
23,635
   
$
219,730
 





4

The following table shows the dollar amount of our loans at December 31, 2018 due after December 31, 2019 as shown in the preceding table, which have fixed interest rates or which have floating or adjustable interest rates.

   
Fixed-Rate
   
Floating or
Adjustable-
Rate
   
Total
 
   
(In Thousands)
 
One-to-four family residential owner occupied
 
$
1,000
   
$
5,582
   
$
6,582
 
One-to-four family residential non-owner occupied
   
14,725
     
30,069
     
44,794
 
Multi-family residential
   
9,050
     
14,917
     
23,967
 
Commercial real estate
   
52,408
     
49,387
     
101,795
 
Construction
   
1,694
     
3,576
     
5,270
 
Home equity
   
734
     
3,283
     
4,017
 
Commercial business
   
15,696
     
4,811
     
20,507
 
Other consumer
   
26
     
--
     
26
 
      Total
 
$
95,333
   
$
111,625
   
$
206,958
 

Scheduled contractual maturities of loans do not necessarily reflect the actual expected term of the loan portfolio.  The average life of mortgage loans is substantially less than their average contractual terms because of prepayments. The average life of mortgage loans tends to increase when current mortgage loan rates are higher than rates on existing mortgage loans and, conversely, decrease when rates on current mortgage loans are lower than existing mortgage loan rates (due to refinancing of adjustable-rate and fixed-rate loans at lower rates). Under the latter circumstance, the weighted average yield on loans decreases as higher yielding loans are repaid or refinanced at lower rates.

One-to-Four Family Residential Owner Occupied Real Estate Loans.  As part of our strategy of diversifying our loan portfolio with higher yielding and shorter-term loan products, Quaint Oak Bank does not actively market the origination of one-to-four family owner occupied residential loans to be held in our loan portfolio. At December 31, 2018, $6.6 million, or 3.0%, of our total loan portfolio, before net items, consisted of one-to-four family owner occupied residential loans.

One-to-Four Family Residential Non-Owner Occupied Real Estate Loans.  A significant part of Quaint Oak Bank’s lending activity is the origination of loans secured by single-family residences for non-owner occupied properties.  As part of our strategy of diversifying our loan portfolio with higher yielding and shorter-term loan products, Quaint Oak Bank does not actively market the origination of one-to-four family residential non-owner occupied real estate loans. At December 31, 2018, $47.4 million, or 21.6%, of our total loan portfolio, before net items, consisted of one-to-four family residential non-owner occupied loans.

It is our policy to lend in a first lien position on non-owner occupied residential property with fixed and variable rates and terms generally up to 15 years or longer amortizations.  Generally, such loans are originated with a three or five year maturity.  Such loans are generally limited to 75%, or less, of the appraised value, or sales price plus improvement costs of the secured real estate property.

One-to-Four Family Residential Loans Originated for Sale.  Quaint Oak Bank through its subsidiary, Quaint Oak Mortgage LLC, originates one-to-four family residential fixed and variable rate first mortgages with amortizing terms less than or equal to 30 years in accordance with secondary market standards.  Loans originated by Quaint Oak Mortgage LLC are sold into the secondary market along with the loans’ servicing rights.   For the year ended December 31, 2018, Quaint Oak Mortgage LLC originated $97.4 million of owner and non-owner occupied residential loans for sale and sold $98.9 million of these loans in the secondary market.  For the year ended December 31, 2017, loans originated for sale through Quaint Oak Mortgage LLC totaled $87.0 million and $85.7 million of these loans were sold in the secondary market.

5

Multi-Family Residential Loans.  Quaint Oak Bank originates loans for multi-unit (five or more) residential properties.  These loans are offered with fixed and adjustable interest rates and amortizations not to exceed 25 years.  Generally, the loan-to-value ratio does not exceed 75%.  These loans are underwritten with the same criteria and procedures as commercial real estate loans.  At December 31, 2018, $24.0 million, or 10.9%, of our total loan portfolio, before net items, consisted of multi-family residential loans.

Commercial Real Estate Loans.  Quaint Oak Bank also originates loans secured by commercial real estate. At December 31, 2018, $103.8 million, or 47.2% of our total loan portfolio, before net items, consisted of commercial real estate loans. Although commercial real estate loans are generally considered to have greater credit risk than other certain types of loans, we intend to continue to originate such loans in our market area.  At December 31, 2018, approximately 68% of total commercial real estate loans were owner occupied.

It is generally our policy to lend in a first lien position on real property occupied as a commercial business property or mixed use properties.  However, in rare instances, we may take a second lien position if approved by the loan committee.  Quaint Oak Bank offers fixed and variable rate mortgage loans with amortization not to exceed 25 years.  Commercial real estate loans are limited to 70%, or less, of the appraised value, or sales price plus improvement costs of the secured real estate property.  Commercial real estate loans are presented to the loan committee for review and approval, including analysis of the creditworthiness of the borrower.  The loan committee reviews the cash flows from the property to determine if the proceeds will adequately cover debt service.  Quaint Oak Bank uses a Debt Service Coverage Ratio (DSCR) of 1.20.  We require the collection of various documents to verify income, including personal tax returns, business tax returns, and copies of current leases.   Assignments of rents and leases as well as the requirement to provide annual updates of financial information and rent rolls are included in the loan documentation.

Construction Loans.   Our construction loans are generally originated for the purpose of building or renovating a single family residential home.  Generally, we do not make construction loans for speculative development.  Funds are advanced incrementally as work is completed.  The borrower is required to make monthly interest payments.  When the construction is finished, the amount of the outstanding loan is generally less than 70% of the completed value of the property.  Quaint Oak Bank is paid in full when the borrower seeks permanent financing or the property is sold. At December 31, 2018, $10.0 million, or 4.6% of Quaint Oak Bank’s total loan portfolio, before net items, consisted of construction loans.

Home Equity Loans.  Quaint Oak Bank is authorized to make loans for a wide variety of personal or consumer purposes.  Quaint Oak Bank originates home equity lines of credit in order to accommodate its customers and because such loans generally have shorter terms than residential mortgage loans.  At December 31, 2018, $4.3 million, or 2.0% of Quaint Oak Bank's total loan portfolio, before net items, consisted of home equity loans.

Commercial Business Loans.  Quaint Oak Bank originates loans to businesses for working capital, purchase of a business, tenant improvements, receivables, purchase of inventory, and for the purchase of business essential equipment.  Business essential equipment is equipment necessary for a business to support or assist with the day-to-day operation or profitability of the business.  At December 31, 2018, $23.6 million, or 10.7% of Quaint Oak Bank’s total loan portfolio, before net items, consisted of commercial business loans.  During the year ended December 31, 2018 the Bank originated $2.8 million of equipment loans held for sale and sold $3.5 million of these loans during the same period.

6

Other Consumer Loans.  Quaint Oak Bank originates loans secured by savings accounts in order to accommodate its existing customers.  At December 31, 2018, $19,000 of Quaint Oak Bank’s total loan portfolio, before net items, consisted of other consumer loans.

Loan Origination and Other Fees.  In addition to interest earned on loans, Quaint Oak Bank generally receives loan origination fees or "points" for originating loans. Loan points are a percentage of the principal amount of the mortgage loan and are charged to the borrower in connection with the origination of the loan.  Such origination fees, net of certain direct loan origination costs, are deferred and recognized as an adjustment to the yield (interest income) of the related loans over the contractual life of the loans.

Asset Quality

General.  Quaint Oak Bank's collection procedures provide that when a loan is 17 days past due, a telephone call is made to the borrower by our collections specialist to determine the reason for the delinquency and to work out a possible solution.  Late charges will be assessed based on the number of days specified in the note beyond the due date.  The Board of Directors is notified of all delinquencies 30 days past due.  In most cases, deficiencies are cured promptly.  While we generally prefer to work with borrowers to resolve such problems, we will institute foreclosure or other collection proceedings when necessary to minimize any potential loss.

Loans are placed on non-accrual status when management believes the probability of collection of interest is doubtful.  When a loan is placed on non-accrual status, previously accrued but unpaid interest is deducted from interest income.  Quaint Oak Bank generally discontinues the accrual of interest income when the loan becomes 90 days past due as to principal or interest unless the credit is well secured and we believe we will fully collect.  There were $250,000 and $2.2 million of non-accrual loans at December 31, 2018 and 2017, respectively.

Real estate and other assets acquired by Quaint Oak Bank as a result of foreclosure or by deed-in-lieu of foreclosure are classified as real estate owned until sold.  There was $1.7 million of other real estate owned at December 31, 2018 and none at December 31, 2017.

Delinquent Loans.  The following table shows the delinquencies in our loan portfolio as of December 31, 2018.


 
December 31, 2018
 

 
30-89
Days Overdue
   
90 or More Days
Overdue
 
   
Number
of Loans
   
Principal
Balance
   
Number
of Loans
   
Principal
Balance
 
   
(Dollars in Thousands)
 
One-to-four family residential-owner occupied
   
6
   
$
1,096
     
2
   
$
182
 
One-to-four family residential-non-owner occupied
   
12
     
1,259
     
1
     
68
 
Multi-family residential
   
1
     
371
     
--
     
--
 
Commercial real estate
   
7
     
2,070
     
2
     
548
 
Construction
   
3
     
2,231
     
--
     
--
 
Home equity
   
1
     
31
     
--
     
--
 
Commercial business and other consumer
   
1
     
3
     
1
     
380
 
Total delinquent loans
   
31
   
$
7,061
     
6
   
$
1,178
 
Delinquent loans to total net loans
           
3.26
%
           
0.54
%
Delinquent loans to total loans
           
3.21
%
           
0.54
%



7

     Non-Performing Assets.  The following table shows the amounts of our non-performing assets (defined as non-accruing loans, accruing loans 90 days or more past due and other real estate owned) and troubled debt restructurings at the dates indicated.

   
December 31,
 
   
2018
   
2017
   
2016
   
2015
   
2014
 
   
(Dollars in Thousands)
 
Non-accruing loans:
                             
      One-to-four family residential-owner occupied
 
$
182
   
$
--
   
$
--
   
$
--
   
$
588
 
      One-to-four family residential-non-owner occupied
   
68
     
120
     
541
     
186
     
836
 
      Multi-family residential
   
--
     
--
     
--
     
--
     
67
 
      Commercial real estate
   
--
     
--
     
660
     
--
     
489
 
      Construction
   
--
     
2,069
     
--
     
--
     
--
 
      Home equity
   
--
     
--
     
--
     
--
     
45
 
      Commercial business loans and other consumer
   
--
     
--
     
--
     
--
     
--
 
Total non-accruing loans
   
250
     
2,189
     
1,201
     
186
     
2,025
 
Accruing loans 90 days or more past due:
                                       
      One-to-four family residential-owner occupied
   
--
     
423
     
9
     
--
     
249
 
      One-to-four family residential-non-owner occupied
   
--
     
217
     
237
     
404
     
136
 
      Multi-family residential
   
--
     
--
     
--
     
--
     
--
 
      Commercial real estate
   
548
     
241
     
117
     
262
     
421
 
      Construction
   
--
     
--
     
308
     
--
     
--
 
      Home equity
   
--
     
--
     
--
     
--
     
--
 
      Commercial business loans and other consumer
   
380
     
--
     
--
     
--
     
--
 
Total accruing loans 90 days or more past due
   
928
     
881
     
671
     
666
     
806
 
      Total non-performing loans (1)
   
1,178
     
3,070
     
1,872
     
852
     
2,831
 
Other real estate owned, net
   
1,650
     
--
     
435
     
1,410
     
111
 
      Total non-performing assets
   
2,828
     
3,070
     
2,307
     
2,262
     
2,942
 
Troubled debt restructurings (2)
   
398
     
714
     
733
     
781
     
796
 
 Total non-performing assets and troubled debt restructurings
 
$
3,226
   
$
3,784
   
$
3,040
   
$
3,043
   
$
3,738
 
Total non-performing loans as a percentage of loans, net
   
0.54
%
   
1.52
%
   
1.06
%
   
0.59
%
   
2.30
%
Total non-performing loans as a percentage of total assets
   
0.43
%
   
1.28
%
   
0.87
%
   
0.46
%
   
1.82
%
Total non-performing assets as a percentage of total assets
   
1.04
%
   
1.28
%
   
1.07
%
   
1.23
%
   
1.89
%
Total non-performing assets and troubled debt restructurings as a percentage of total assets
 
1.19
%
   
1.58
%
   
1.41
%
   
1.65
%
   
2.40
%
__________________
(1)
Non-performing loans consist of non-accruing loans plus accruing loans 90 days or more past due.
(2)
Troubled debt restructurings not included in non-accruing loans and accruing loans 90 days or more past due.

At December 31, 2018, we had two loans totaling $398,000 that were identified as troubled debt restructurings ("TDR") and were performing in accordance with their modified terms.  If a TDR is placed on non-accrual it is not reverted back to accruing status until the borrower makes timely payments as contracted for at least six months and future collection under the revised terms is probable.

Classified Assets.  Federal regulations require that each insured savings institution classify its assets on a regular basis. In addition, in connection with examinations of insured institutions, federal examiners have authority to identify problem assets and, if appropriate, classify them. There are three classifications for problem assets: "substandard," "doubtful" and "loss." Substandard assets have one or more defined weaknesses and are characterized by the distinct possibility that the insured institution will sustain some loss if the deficiencies are not corrected. Doubtful assets have the weaknesses of substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions and values questionable, and there is a higher possibility of loss. An asset classified loss is considered uncollectible and of such little value that continuance as an asset of the institution is not warranted. Another category designated "special mention" also must be established and maintained for assets which do not currently expose an insured institution to a sufficient degree of risk to warrant classification as substandard, doubtful or loss. Assets classified as substandard or doubtful require the institution to establish general allowances for loan losses. If an asset or portion thereof is classified as loss, the insured institution must either establish specific allowances for loan losses in the amount of 100% of the portion of the asset classified loss, or charge-off such amount. General loss allowances established to cover possible losses related to assets classified substandard or doubtful may be included in determining an institution's regulatory capital, while specific valuation allowances for loan losses do not qualify as regulatory capital. Federal examiners may disagree with an insured institution's classifications and amounts reserved.

8

Allowance for Loan Losses.  At December 31, 2018, Quaint Oak Bank's allowance for loan losses amounted to $2.0 million.   The allowance for loan losses is maintained at a level considered adequate to provide for losses that can be reasonably anticipated. Management performs a quarterly evaluation of the adequacy of the allowance. The allowance is based on our past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower's ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant revision as more information becomes available.

While management believes that it determines the amount of the allowance based on the best information available at the time, the allowance will need to be adjusted as circumstances change and assumptions are updated. Future adjustments to the allowance could significantly affect net income.

The following table shows changes in our allowance for loan losses during the periods presented.

   
December 31,
 
   
2018
   
2017
   
2016
   
2015
   
2014
 
   
(Dollars in Thousands)
 
Total loans outstanding at end of period, net
 
$
216,898
   
$
201,667
   
$
176,807
   
$
143,305
   
$
123,331
 
                                         
Average loans outstanding (1)
 
$
209,501
   
$
187,728
   
$
155,649
   
$
138,328
   
$
116,249
 
                                         
Allowance for loan losses, beginning of period
 
$
1,812
   
$
1,605
   
$
1,313
   
$
1,148
   
$
941
 
Provision for loan losses
   
415
     
284
     
292
     
320
     
394
 
Charge-offs:
                                       
One-to-four family residential owner occupied
   
--
     
--
     
--
     
--
     
(57
)
One-to-four family residential non-owner occupied
   
(47
)
   
(56
)
   
--
     
(110
)
   
--
 
     Commercial real estate
   
--
     
(24
)
   
--
     
(21
)
   
(133
)
     Construction
   
(215
)
   
--
     
--
     
--
     
--
 
Home Equity
   
--
     
--
     
--
     
(45
)
   
--
 
Total charge-offs
   
(262
)
   
(80
)
   
--
     
(176
)
   
(190
)
Recoveries on loans previously charged-off:
                                       
     Commercial real estate
   
--
     
3
     
--
     
21
     
3
 
              Total recoveries
   
--
     
3
     
--
     
21
     
3
 
Allowance for loan losses, end of period
 
$
1,965
   
$
1,812
   
$
1,605
   
$
1,313
   
$
1,148
 
                                         
Allowance for loan losses as a percent of
      non-performing loans
   
166.81
%
   
59.02
%
   
85.74
%
   
154.11
%
   
40.55
%
                                         
Ratio of net charge-offs during the period
to average loans outstanding during the period
   
0.13
%
   
0.04
%
   
--
%
   
0.11
%
   
0.16
%
____________________
(1)          Excludes loans held for sale.





9

    The following table shows how our allowance for loan losses is allocated by loan class at each of the dates indicated.

   
December 31,
 
   
2018
   
2017
   
2016
   
2015
   
2014
 
   
Amount of Allowance
   
Loan
Category
as a % of
Total Loans
   
Amount of Allowance
   
Loan
Category
as a % of
Total Loans
   
Amount of Allowance
   
Loan
Category
as a % of
Total Loans
   
Amount of Allowance
   
Loan
Category
as a % of
Total Loans
   
Amount of Allowance
   
Loan
Category
as a % of
Total Loans
 
   
(Dollars in Thousands)
 
One-to-four family residential owner
  occupied
 
$
51
     
3.0
%
 
$
48
     
2.8
%
 
$
41
     
3.0
%
 
$
55
     
4.0
%
 
$
75
     
5.7
%
One-to-four family residential non-owner
  occupied
   
435
     
21.6
     
540
     
25.4
     
503
     
29.0
     
486
     
35.1
     
418
     
38.9
 
Multi-family residential
   
156
     
10.9
     
152
     
10.6
     
103
     
8.2
     
81
     
8.5
     
60
     
8.1
 
Commercial real estate
   
839
     
47.2
     
687
     
45.1
     
616
     
43.4
     
389
     
34.3
     
324
     
29.7
 
Construction
   
175
     
4.6
     
136
     
7.6
     
138
     
8.6
     
153
     
11.1
     
122
     
11.4
 
Home equity
   
21
     
2.0
     
27
     
2.5
     
37
     
2.6
     
50
     
5.1
     
46
     
5.6
 
Commercial business and other consumer
   
247
     
10.7
     
140
     
5.9
     
87
     
5.2
     
18
     
1.8
     
7
     
0.6
 
Unallocated
   
41
     
--
     
82
     
0.1
     
80
     
--
     
81
     
0.1
     
96
     
--
 
Total
 
$
1,965
     
100.0
%
 
$
1,812
     
100.0
%
 
$
1,605
     
100.0
%
 
$
1,313
     
100.0
%
 
$
1,148
     
100.0
%

The allowance consists of specific, general and unallocated components. The specific component relates to loans that are classified as impaired. For loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers pools of loans by loan class. These pools of loans are evaluated for loss exposure based upon historical loss rates for each of these categories of loans, adjusted for qualitative factors. These loss factors may include changes in lending policies and procedures, changes in existing general economic and business conditions affecting our primary lending areas, credit quality trends, collateral value, loan volumes and concentrations, seasoning of the loan portfolio, recent loss experience in particular segments of the portfolio, duration of the current business cycle and bank regulatory examination results. The applied loss factors are reevaluated quarterly to ensure their relevance in the current economic environment.  Residential mortgage lending generally entails a lower risk of default than other types of lending. Consumer loans and commercial real estate loans generally involve more risk of collectability because of the type and nature of the collateral and, in certain cases, the absence of collateral. It is our policy to establish a specific reserve for loss on any delinquent loan when we determine that a loss is probable. An unallocated component is maintained to cover uncertainties that could affect our estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.








10

Investment Activities

General.  We invest in securities pursuant to our investment policy, which has been approved by our Board of Directors.  Our investment policy is reviewed annually by our Asset-Liability Committee (ALCO).  All policy changes recommended by ALCO must be approved by the Board of Directors.  ALCO is authorized by the Board to make investments consistent with the investment policy.  While general investment strategies are developed and authorized by ALCO, the execution of specific actions rests with the Chief Financial Officer and the President and Chief Executive Officer.

Our investment policy is designed primarily to manage the interest rate sensitivity of our assets and liabilities, to generate a favorable return without incurring undue interest rate and credit risk, to complement our lending activities and to provide and maintain liquidity.

Our securities are classified as available for sale, held to maturity, or trading, at the time of acquisition.  Securities classified as held to maturity must be purchased with the intent and ability to hold that security until its final maturity and can be sold prior to maturity only under rare circumstances.  Held to maturity securities are accounted for based upon the amortized cost of the security.  Available for sale securities can be sold at any time based upon our needs or market conditions.  Available for sale securities are accounted for at fair value, with unrealized gains and losses on these securities, net of income tax provisions, reflected in stockholders’ equity as accumulated other comprehensive income.  At December 31, 2018, we had $6.7 million of securities classified as available for sale and no securities classified as held to maturity or trading.

Federal Home Loan Bank (FHLB) stock is a restricted investment security, carried at cost. The purchase of FHLB stock provides banks with the right to be a member of the FHLB and to receive the products and services that the FHLB provides to member banking institutions. Unlike other types of stock, FHLB stock is acquired primarily for the right to receive advances from the FHLB, rather than for the purpose of maximizing dividends or stock growth. FHLB stock is an activity-based stock that is directly proportional to the volume of advances taken by a member institution. The FHLB will repurchase capital stock at $1.00 per share from Quaint Oak Bank.  The FHLB has paid dividends on the capital stock in each quarter of 2017 and 2018.

The following table sets forth our investment portfolio at carrying value as of the dates indicated.

   
December 31,
 
   
2018
   
2017
   
2016
 
   
(In Thousands)
 
Interest-earning time deposits with other financial institutions
 
$
4,927
   
$
4,879
   
$
6,098
 
Governmental National Mortgage Association mortgage-backed securities
   
4,873
     
5,643
     
6,590
 
Federal Home Loan Mortgage Corporation mortgage-backed securities
   
1,082
     
1,342
     
1,871
 
Federal National Mortgage Association securities mortgage-backed
   
367
     
570
     
740
 
Debt securities, U.S. government agency
   
358
     
357
     
354
 
Investment in FHLB stock
   
1,086
     
1,234
     
713
 
    Total
 
$
12,693
   
$
14,025
   
$
16,366
 








11

    The following table sets forth the amount of investment securities which mature during each of the periods indicated and the weighted average yields for each range of maturities at December 31, 2018.

   
Amounts at December 31, 2018 Which Mature In
 
   
One Year
or Less
   
Weighted
Average
Yield
   
Over One
Year
Through
Five Years
   
Weighted
Average
Yield
   
Over Five
Years
Through
Ten
Years
   
Weighted
Average
Yield
   
Over
Ten
Years
   
Weighted
Average
Yield
 
   
(Dollars in Thousands)
             
Interest-earning time deposits with other financial institutions
 
$
1,604
     
1.21
%
 
$
3,323
     
2.23
%
 
$
--
     
--
%
 
$
--
     
--
%
Governmental National Mortgage Association mortgage-backed securities
   
--
     
--
     
--
     
--
     
--
     
--
     
4,844
     
2.83
 
Federal Home Loan Mortgage Corporation mortgage-backed securities
   
--
     
--
     
--
     
--
     
--
     
--
     
1,111
     
2.25
 
Federal National Mortgage   Association mortgage-backed securities
   
--
     
--
     
--
     
--
     
--
     
--
     
367
     
3.68
 
Debt securities, U.S. government agency
   
--
     
--
     
360
     
1.25
     
--
     
--
     
--
     
--
 
   
$
1,604
     
1.21
%
 
$
3,683
     
2.13
%
 
$
--
     
--
%
 
$
6,322
     
2.78
%

Sources of Funds

General.  Deposits are the primary source of Quaint Oak Bank's funds for lending and other investment purposes. In addition to deposits, principal and interest payments on loans are a source of funds. Loan payments are a relatively stable source of funds, while deposit inflows and outflows are significantly influenced by general interest rates and money market conditions. 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.

Deposits.  Deposits are attracted by Quaint Oak Bank principally from southwestern Bucks and southeastern Montgomery Counties, northeast Philadelphia and Lehigh Valley areas of Pennsylvania, although we also attract deposits from outside our market area and the Commonwealth of Pennsylvania. Deposit account terms vary, with the principal differences being the minimum balance required, the time periods the funds must remain on deposit, and the interest rate.  Quaint Oak Bank offers a variety of deposit accounts with a range of rates and terms.  Our deposit accounts consist of certificates of deposit and various savings products, including non-interest bearing business and consumer checking accounts.

Quaint Oak Bank generally does not solicited deposits from outside Pennsylvania or pay fees to brokers to solicit funds for deposit.  At December 31, 2018, approximately 10% of Quaint Oak Bank’s total deposits were held by customers outside the Commonwealth of Pennsylvania.

Interest rates paid, maturity terms, service fees and withdrawal penalties are established on a periodic basis. Management determines the rates and terms based on rates paid by competitors, the need for funds or liquidity, growth goals and federal regulations.  Management attempts to control the flow of deposits by pricing the accounts to remain generally competitive with other financial institutions in our market area.




12

The following table shows the distribution of, and certain other information relating to, our deposits by type of deposit, as of the dates indicated.

     
December 31,
 
     
2018
   
2017
   
2016
 
     
Amount
   
%
   
Amount
   
%
   
Amount
   
%
 
     
(Dollars in Thousands)
 
Certificate accounts:
                                     
     0.00% - 0.99%
   
$
--
     
--
%
 
$
5,121
     
2.8
%
 
$
12,218
     
6.9
%
     1.00% - 1.99%
     
60,568
     
28.6
     
86,685
     
46.5
     
77,005
     
43.5
 
     2.00% - 2.99%
     
102,539
     
48.4
     
53,232
     
28.6
     
47,845
     
27.0
 
     3.00% - 3.99%
     
3,109
     
1.4
     
--
     
--
     
--
     
--
 
Total certificate accounts
 
166,216
     
78.4
     
145,038
     
77.9
     
137,068
     
77.4
 
Transaction accounts:
                                                 
Non-interest bearing checking
   accounts
 
17,542
     
8.3
     
7,956
     
4.3
     
5,852
     
3.3
 
Passbook accounts
     
192
     
0.1
     
463
     
0.2
     
1,189
     
0.7
 
Savings accounts
     
1,120
     
0.5
     
2,353
     
1.3
     
1,784
     
1.0
 
Money market accounts
 
26,841
     
12.7
     
30,411
     
16.3
     
31,114
     
17.6
 
Total transaction accounts
 
45,695
     
21.6
     
41,183
     
22.1
     
39,939
     
22.6
 
Total deposits
   
$
211,911
     
100.0
%
 
$
186,221
     
100.0
%
 
$
177,007
     
100.0
%

    The following table shows the average balance of each type of deposit and the average rate paid on each type of deposit for the periods indicated.

   
Year Ended December 31,
 
   
2018
   
2017
   
2016
 
   
Average
Balance
   
Interest
Expense
   
Average
Rate Paid
   
Average
Balance
   
Interest
Expense
   
Average
Rate Paid
   
Average
Balance
   
Interest
Expense
   
Average
Rate Paid
 
   
(Dollars in Thousands)
 
Passbook accounts
 
$
310
   
$
--
     
--
%
 
$
694
   
$
1
     
0.14
%
 
$
1,241
   
$
1
     
0.08
%
Savings accounts
   
1,906
     
4
     
0.21
     
1,584
     
3
     
0.19
     
2,368
     
5
     
0.21