QUAINT OAK BANCORP: DISCUSSION DE LA DIRECTION ET ANALYSE DE LA SITUATION FINANCIÈRE ET DES RÉSULTATS D'EXPLOITATION (formulaire 10-Q)


Les déclarations prospectives sont sujettes à changement


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 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 the Company is or will be doing
business, being less favorable than expected;(6) political and social unrest,
including acts of war or terrorism; (7) the impact of the current outbreak of
the novel coronavirus (COVID-19) or (8) 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.  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 loan 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, 2020, the Bank has five wholly-owned subsidiaries, Quaint Oak
Mortgage, LLC, Quaint Oak Real Estate, LLC, Quaint Oak Abstract, LLC, QOB
Properties, LLC, and Quaint Oak Insurance Agency, LLC, each a Pennsylvania
limited liability company.  The mortgage, real estate and abstract companies
offer mortgage banking, real estate sales and title abstract services,
respectively, in the Lehigh Valley region of Pennsylvania, and began operation
in July 2009.  In February 2019, Quaint Oak Mortgage opened a mortgage banking
office in Philadelphia, Pennsylvania.  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,
located in Chalfont, Pennsylvania, began operations in August 2016 and provides
a broad range of personal and commercial insurance coverage solutions. In
February 2020, Quaint Oak Bank opened a full-service retail banking office in
Philadelphia, Pennsylvania.


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COVID-19[feminine


On March 11, 2020, the World Health Organization declared COVID-19 a pandemic.
The effects of COVID-19 did not have a material impact on the financial results
of the Company as of June 30, 2020.  Due to orders issued by the governor of
Pennsylvania and for the health of our customers and employees, the Bank closed
lobbies to all three branch offices but remained fully operational. Other
immediate responses to the pandemic included some of the following actions by
the Company:

• Déplacement de plus de 92% de ses employés vers le statut de travail à distance à domicile.
• Suppression des frais sur les comptes de dépôt et les services de gestion de trésorerie.


In response to the COVID-19 crisis, the Coronavirus Aid, Relief, and Economic
Security ("CARES") Act was passed by Congress and signed into law on March 27,
2020. The CARES Act provides an estimated $2.2 trillion of economy-wide
financial stimulus to combat the pandemic and stimulate the economy in the form
of financial aid to individuals, businesses, nonprofits, states, and
municipalities through loans, grants, tax changes, and other types of relief.

Ce qui suit décrit certaines de nos réponses au COVID-19 par rapport au CARES
Agir et autres effets de la pandémie sur nos activités.

Programme de protection des chèques de paie. La loi CARES a autorisé la Petite entreprise
Administration
("SBA") pour garantir temporairement les prêts au titre d'un nouveau prêt 7 (a)
programme appelé Programme de protection des chèques de paie («PPP»). En tant que SBA qualifié
prêteur, nous avons été automatiquement autorisés à émettre des prêts PPP et avons choisi de
participer.

À travers 10 août 2020, la Banque a financé 848 prêts PPP pour un capital total
soldes de 91,8 millions de dollars et a reçu l'approbation de la SBA pour cinq autres prêts PPP
pour 3,2 millions de dollars.


Paycheck Protection Program Liquidity Facility. The CARES Act also allocated a
limited amount of funds to the Federal Reserve Board (FRB) with a broad mandate
to provide liquidity to eligible businesses, states or municipalities in light
of COVID-19. On April 9, 2020, the U.S. Department of the Treasury announced
several new or expanded lending programs to provide relief for businesses and
governments. One of these programs was the Paycheck Protection Program Liquidity
Facility (PPPLF). Under the PPPLF, all depository institutions that originate
PPP loans are eligible to borrow on a non-recourse basis from their regional
Federal Reserve Bank using SBA PPP loans as collateral. The principal amount of
loans will be equal to the PPP loans pledged as collateral. There are no fees
associated with these loans and the interest rate will be 35 basis points. The
maturity date of PPPLF loans will be the same as the maturity date of the PPP
loans pledged as collateral. The PPPLF loan maturity date will be accelerated if
the underlying PPP loan goes into default and the lender sells the PPP loan to
the SBA under the SBA guarantee. The PPPLF loan maturity date also will be
accelerated for any loan forgiveness reimbursement received by the lender from
the SBA.

In April 2020, the Bank received approval to borrow from the FRB under the PPPLF
program to assist in funding PPP loans.  Through August 10, 2020, the Bank used
the FRB program to fund $48.9 million of PPP loans.

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Loan Modifications/Troubled Debt Restructurings. Under the CARES Act, loans less
than 30 days past due as of December 31, 2019 will be considered current for
COVID-19 modifications. A financial institution can then suspend the
requirements under GAAP for loan modifications related to COVID-19 that would
otherwise be categorized as a troubled debt restructuring ("TDR"), and suspend
any determination of a loan modified as a result of COVID-19 as being a TDR,
including the requirement to determine impairment for accounting purposes.
Financial institutions wishing to utilize this authority must make a policy
election, which applies to any COVID-19 modification made between March 1, 2020
and the earlier of either December 31, 2020 or the 60th day after the end of the
COVID-19 national emergency. Quaint Oak bank has made that election. Similarly,
the Financial Accounting Standards Board has confirmed that short-term
modifications made on a good-faith basis in response to COVID-19 to loan
customers who were current prior to any relief will not be considered TDRs.

Avant la promulgation de la loi CARES, les agences de régulation bancaire
fourni des indications sur la façon dont certaines modifications à court terme ne seraient pas
ont examiné les TDR, et ont par la suite confirmé que ces orientations pourraient être
applicable aux prêts qui ne sont pas éligibles au traitement comptable favorable
en vertu de l'article 4013 de la loi CARES.


The Bank addresses loan payment modification requests on a case-by-case basis
considering the effects of the COVID-19 pandemic, related economic slow-down and
stay-at-home orders on our customer and their current and projected cash flows
through the term of the loan. Through August 10, 2020, we modified 223 loans
with principal balances totaling $85.8 million representing approximately 24.7%
of our June 30, 2020 loan balances. A majority of deferrals are two-month
payment deferrals of principal and interest, with payments after deferral
increased to collect amounts deferred. Of the total loans deferred to date, 71
loans totaling $37.3 million were granted a second deferral. It is too early to
determine if these modified loans will perform in accordance with their modified
terms.

Les détails concernant les modifications réelles du prêt sont les suivants:

                                                As of August 10, 2020
                                          Number of                                 Percent of Total
                                           Covid-19               Balance                Loans
                                          Deferments           (in thousands)       at June 30, 2020
One-to-four family residential owner
occupied                                              5       $          2,072                   33.0 %
One-to-four family residential
non-owner occupied                                   47                  8,467                   21.2
Multi-family residential                             12                  9,065                   35.5
Commercial real estate                               99                 51,098                   40.2
Home equity                                           4                    254                    5.7
Construction                                          -                      -                      -
Commercial business                                  56                 14,805                   10.9
Other consumer                                        -                      -                      -
 Total                                              223       $         85,761                   24.7 %



Méthodes comptables critiques


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. The following accounting policies
comprise those that management believes 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 period or in future periods.


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Allowance for Loan Losses.  The allowance for loan losses represents
management's estimate of losses inherent in the loan portfolio as of the balance
sheet date and is recorded as a reduction to loans receivable. The allowance for
loan losses is increased by the provision for loan losses, and decreased by
charge-offs, net of recoveries. Loans deemed to be uncollectible are charged
against the allowance for loan losses, and subsequent recoveries, if any, are
credited to the allowance. All, or part, of the principal balance of loans
receivable are charged off to the allowance as soon as it is determined that the
repayment of all, or part, of the principal balance is highly unlikely. Because
all identified losses are immediately charged off, no portion of the allowance
for loan losses is restricted to any individual loan or groups of loans, and the
entire allowance is available to absorb any and all loan losses.

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
the Company's 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.

The allowance consists of specific, general and unallocated components. The
specific component relates to loans that are designated as impaired. For loans
that are designated 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 significant 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 owner occupied 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 the Company's policy to establish a
specific reserve for loss on any delinquent loan when it determines that a loss
is probable. An unallocated component is maintained to cover uncertainties that
could affect management's 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.

A loan is considered impaired when, based on current information and events, it
is probable that the Company will be unable to collect the scheduled payments of
principal or interest when due according to the contractual terms of the loan
agreement. Factors considered by management in determining impairment include
payment status, collateral value and the probability of collecting scheduled
principal and interest payments when due. Loans that experience insignificant
payment delays and payment shortfalls generally are not considered impaired.
Management determines the significance of payment delays and payment shortfalls
on a case-by-case basis, taking into consideration all of the circumstances
surrounding the loan and the borrower, including the length of the delay, the
reasons for the delay, the borrower's prior payment record and the amount of the
shortfall in relation to the principal and interest owed. Impairment is measured
on a loan by loan basis by either the present value of expected future cash
flows discounted at the loan's effective interest rate or the fair value of the
collateral if the loan is collateral dependent.  An allowance for loan losses is
established for an impaired loan if its carrying value exceeds its estimated
fair value. The estimated fair values of substantially all of the Company's
impaired loans are measured based on the estimated fair value of the loan's
collateral.

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A loan is identified as a troubled debt restructuring ("TDR") if the Company,
for economic or legal reasons related to a debtor's financial difficulties,
grants a concession to the debtor that it would not otherwise consider.
Concessions granted under a TDR typically involve a temporary or permanent
reduction in payments or interest rate or an extension of a loan's stated
maturity date at less than a current market rate of interest. Loans identified
as TDRs are designated as impaired.

For loans secured by real estate, estimated fair values are determined primarily
through third-party appraisals. When a real estate secured loan becomes
impaired, a decision is made regarding whether an updated certified appraisal of
the real estate is necessary. This decision is based on various considerations,
including the age of the most recent appraisal, the loan-to-value ratio based on
the original appraisal and the condition of the property. Appraised values are
discounted to arrive at the estimated selling price of the collateral, which is
considered to be the estimated fair value. The discounts also include estimated
costs to sell the property.

The allowance calculation methodology includes further segregation of loan
classes into risk rating categories. The borrower's overall financial condition,
repayment sources, guarantors and value of collateral, if appropriate, are
evaluated annually for all loans (except one-to-four family residential
owner-occupied loans) where the total amount outstanding to any borrower or
group of borrowers exceeds $500,000, or when credit deficiencies arise, such as
delinquent loan payments. Credit quality risk ratings include regulatory
classifications of special mention, substandard, doubtful and loss. Loans
criticized special mention have potential weaknesses that deserve management's
close attention. If uncorrected, the potential weaknesses may result in
deterioration of the repayment prospects. Loans classified substandard have a
well-defined weakness or weaknesses that jeopardize the liquidation of the debt.
They include loans that are inadequately protected by the current sound net
worth and paying capacity of the obligor or of the collateral pledged, if any.
Loans classified doubtful have all the weaknesses inherent in loans classified
substandard with the added characteristic that collection or liquidation in
full, on the basis of current conditions and facts, is highly improbable. Loans
classified as a loss are considered uncollectible and are charged to the
allowance for loan losses. Loans not classified are rated pass. In addition,
Federal regulatory agencies, as an integral part of their examination process,
periodically review the Company's allowance for loan losses and may require the
Company to recognize additions to the allowance based on their judgments about
information available to them at the time of their examination, which may not be
currently available to management. Based on management's comprehensive analysis
of the loan portfolio, management believes the current level of the allowance
for loan losses is adequate.

Income Taxes.  Deferred income tax assets and liabilities are determined using
the liability (or balance sheet) method.  Under this method, the net deferred
tax asset or liability is determined based on the tax effects of the temporary
differences between the book and tax bases of the various assets and liabilities
and net operating loss carryforwards and gives current recognition to changes in
tax rates and laws.  The realization of our deferred tax assets principally
depends upon our achieving projected future taxable income.  We may change our
judgments regarding future profitability due to future market conditions and
other factors.  We may adjust our deferred tax asset balances if our judgments
change.

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Comparaison de la situation financière à 30 juin 2020 et 31 décembre 2019


General.   The Company's total assets at June 30, 2020 were $408.0 million, an
increase of $105.4 million, or 34.9%, from $302.5 million at December 31, 2019.
This growth in total assets was primarily due to a $95.3 million, or 38.6%,
increase, in loans receivable, net, and a $4.1 million, or 45.5%, increase in
loans held for sale.  The largest increases within the loan portfolio occurred
in commercial business loans which increased $90.6 million, or 198.1%,
commercial real estate loans which increased $7.8 million, or 6.5%, and
multi-family residential loans which increased $3.3 million, or 14.8%. The
increase in commercial business loans was due primarily to the $89.1 million of
the SBA PPP loans generated during the second quarter of 2020.  These increases
were partially offset by a $4.3 million, or 34.6%, decrease in construction
loans.

Cash and Cash Equivalents. Cash and cash equivalents increased $2.1 million, or
14.2%, from $14.6 million at December 31, 2019 to $16.6 million at June 30, 2020
with the expectation that excess liquidity will be used to fund loans.

Investment in Interest-Earning Time Deposits.  Investment in interest-earning
time deposits decreased $250,000, or 2.5%, from $10.2 million at December 31,
2019 to $9.9 million at June 30, 2020 as one interest-earning time deposit
matured during the six months ended June 30, 2020.

Investment Securities Available for Sale.  Investment securities available for
sale increased $3.0 million, or 39.0%, from $7.6 million at December 31, 2019 to
$10.6 million at June 30, 2020, as the Company invested excess liquidity into
higher yielding interest-earning assets.

Loans Held for Sale.  Loans held for sale increased $4.1 million, or 45.5%, from
$8.9 million at December 31, 2019 to $13.0 million at June 30, 2020 as the
Bank's mortgage banking subsidiary, Quaint Oak Mortgage, LLC, originated $79.3
million of one-to-four family residential loans during the six months ended June
30, 2020 and sold $75.2 million of loans in the secondary market during this
same period. The Bank did not originate or sell any equipment loans held for
sale during the six months ended June 30, 2020.

Loans Receivable, Net.  Loans receivable, net, increased $95.3 million, or
38.6%, to $342.0 million at June 30, 2020 from $246.7 millionDecember 31,
2019.  This increase was funded primarily from deposits, borrowings under the
Federal Reserve's Paycheck Protection Program Liquidity Facility, and excess
liquidity.  Increases within the portfolio occurred in commercial business loans
which increased $90.6 million, or 198.1%, commercial real estate loans which
increased $7.8 million, or 6.5%, multi-family residential loans which increased
$3.3 million, or 14.8%, home equity loans which increased $746,000, or 20.0%,
and non-owner occupied loans which increased $28,000, or 0.1%.  These increases
were partially offset by decreases of $4.3 million, or 34.6%, in construction
loans, $18,000, or 0.3%, in one-to-four family residential owner occupied loans,
and $9,000, or 40.9%, in other consumer loans.  The increase in commercial
business loans was due primarily to the $89.1 million of the SBA PPP loans
generated during the second quarter of 2020. The Company continues its strategy
of diversifying its loan portfolio with higher yielding and shorter-term loan
products and selling substantially all of its newly originated one-to-four
family owner-occupied loans into the secondary market.

Other Real Estate Owned.  Other real estate owned (OREO) amounted to $1.8
million at December 31, 2019 consisting of four properties that were collateral
for a non-performing construction loan. At June 30, 2020, OREO amounted to
$921,000 consisting of two properties that were collateral for a non-performing
construction loan.  During the six month ended June 30, 2020, the Company made
$121,000 of capital improvements to the properties and sold two properties
totaling $1.0 million and realized a net gain of $18,000.  Non-performing assets
amounted to $2.4 million, or 0.58% of total assets at June 30, 2020 compared to
$2.2 million, or 0.72% of total assets at December 31, 2019.


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Prepaid Expenses and Other Assets.  Prepaid expenses and other assets increased
$1.2 million, or 42.9%, to $4.0 million at June 30, 2020 from $2.8 million at
December 31, 2019, due primarily to the adoption of Financial Accounting
Standards Board accounting standard ASU 2016-02, Leases (Topic 842) by the
Company on January 1, 2019.  This standard requires a lessee to recognize the
assets and liabilities that arise from leases on the balance sheet by
recognizing a liability to make lease payments (the lease liability) and a
right-of-use asset representing its right to use the underlying asset for the
lease term.  The impact of adopting this accounting standard on the Company's
balance sheet accounted for $616,000 of the increase.

Deposits.  Total deposits increased $61.6 million, or 27.1%, to $289.1 million
at June 30, 2020 from $227.5 million at December 31, 2019. This increase in
deposits was primarily attributable to increases of $34.6 million, or 219.5%, in
non-interest bearing checking accounts, $16.4 million, or 64.5%, in money market
accounts, and $9.4 million, or 5.1%, in certificates of deposit. The increase in
non-interest bearing checking accounts was primarily due to the checking
accounts opened by PPP loan customers.

Borrowings.  Total Federal Home Loan Bank (FHLB) borrowings decreased $7.1
million, or 19.5%, to $29.2 million at June 30, 2020 from $36.3 million at
December 31, 2019. Short-term FHLB advances declined from $10.0 million at
December 31, 2019 to none at June 30, 2020 as the Company used excess liquidity
to pay-off $6.0 million of advances and termed-out $4.0 million of advances at
varying maturities.  Long-term FHLB borrowings increased $2.9 million, or 11.1%,
from $26.3 million at December 31, 2019 to $29.2 million at June 30, 2020,
primarily as a result of the $4.0 million term-out of short-term borrowings and
the pay-off of a $1.0 million term loan that matured in June 2020. Federal
Reserve Bank long-term borrowings increased to $48.9 million at June 30, 2020,
from none at December 31, 2019 as the Company borrowed this amount to fund PPP
loans under the Federal Reserve's Paycheck Protection Program Liquidity Facility
(PPPLF).  Under the PPPLF the Company pledged certain PPP loans as collateral
and borrowed from the Federal Reserve at a rate of 0.35% that is fixed for two
years.

Stockholders' Equity.  Total stockholders' equity increased $1.0 million, or
3.9%, to $26.9 million at June 30, 2020 from $25.9 million at December 31,
2019.  Contributing to the increase was net income for the six months ended June
30, 2020 of $1.2 million, the reissuance of treasury stock for exercised stock
options of $101,000, common stock earned by participants in the employee stock
ownership plan of $89,000, amortization of stock awards and options under our
stock compensation plans of $87,000, and the reissuance of treasury stock under
the Bank's 401(k) Plan of $49,000.  These increases were partially offset by
dividends paid of $357,000, the purchase of treasury stock of $112,000, and
other comprehensive income, net of $14,000.

Comparaison des résultats d'exploitation pour les trois mois terminés 30 juin 2020 et
2019


General.  Net income amounted to $731,000 for the three months ended June 30,
2020, an increase of $66,000, or 9.9%, compared to net income of $665,000 for
the three months ended June 30, 2019.  The increase in net income on a
comparative quarterly basis was primarily the result of an increase in net
interest income of $559,000, partially offset by a decrease in non-interest
income of $78,000, and increases in non-interest expense of $168,000, the
provision for loan losses of $229,000, and the provision for income taxes of
$18,000.


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Net Interest Income.  Net interest income increased $559,000, or 26.6%, to $2.7
million for the three months ended June 30, 2020 from $2.1 million for the three
months ended June 30, 2019.  The increase was driven by a $556,000, or 16.0%,
increase in interest income and a $3,000, or 0.2%, decrease in interest expense.

Interest Income.  Interest income increased $556,000, or 16.0%, to $4.0 million
for the three months ended June 30, 2020 from $3.5 million for the three months
ended June 30, 2019. The increase in interest income was primarily due to a
$86.7 million increase in average loans receivable, net, including loans held
for sale, which increased from an average balance of $229.8 million for the
three months ended June 30, 2019 to an average balance of $316.5 million for the
three months ended June 30, 2020, and had the effect of increasing interest
income $1.2 million.  This increase in interest income was partially offset by a
65 basis point decrease in the yield on average loans receivable, net, including
loans held for sale, which decreased from 5.57% for the three months ended June
30, 2019 to 4.92% for the three months ended June 30, 2020, and had the effect
of decreasing interest income $516,000.  Also partially offsetting this increase
was a 215 basis point decrease in the yield on average cash and cash equivalents
due from banks, interest bearing, which decreased from 2.24% for the three
months ended June 30, 2019 to 0.09% for the three months ended June 30, 2020,
and had the effect of reducing interest income $151,000.

Interest Expense.  Interest expense decreased modestly by $3,000, or 0.2%, to
$1.4 million for both the three months ended June 30, 2020 and 2019.  The
decrease in interest expense was primarily attributable to 22 basis point
decrease in rate on average certificate of deposit accounts, which decreased
from 2.31% for the three months ended June 30, 2019 to 2.09% for the three
months ended June 30, 2020, and had the effect of decreasing interest expense by
$107,000.  This decrease was partially offset by a $12.3 million increase in
average certificate of deposit accounts which increased from an average balance
of $179.3 million for the three months ended June 30, 2019 to an average balance
of $191.6 million for the three months ended June 30, 2020, and had the effect
of increasing interest expense $71,000.  The decrease in interest expense was
also partially offset by an increase in average Federal Reserve Bank borrowings
of $24.2 million which had the effect of increasing interest expense by $23,000.
The average interest rate spread decreased from 2.82% for the three months ended
June 30, 2019 to 2.53% for the three months ended June 30, 2020 while the net
interest margin decreased from 3.09% for the three months ended June 30, 2019 to
2.92% for the three months ended June 30, 2020.






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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,
                                         2020                                       2019
                                                      Average                                    Average
                         Average                      Yield/        Average                      Yield/
                         Balance       Interest        Rate         Balance       Interest        Rate
                                                     (Dollars in thousands)
Interest-earning
assets:

Dû par les banques,
portant intérêt 27 997 $6 $ 0,09% 22 682 $

            127          2.24 %
 Investment in
interest-earning time
deposits                    9,922             61          2.46        10,154             74          2.92

Investissement

securities available
for sale                    8,245             54          2.62         8,240             56          2.72
 Loans receivable,
net (1) (2)               316,506          3,891          4.92       229,786          3,200          5.57
 Investment in FHLB
stock                       1,344             21          6.25         1,088             20          7.35
   Total
interest-earning
assets                    364,014          4,033          4.43 %     271,950          3,477          5.11 %
Non-interest-earning
assets                     15,743                                     12,433
   Total assets         $ 379,757$ 284,383
Interest-bearing
liabilities:
  Passbook accounts     $       6     $        *             * %   $      77     $        *             * %
  Savings accounts          1,921              1          0.21         1,754              1          0.23
  Money market
accounts                   33,986             68          0.80        27,714             55          0.79

Certificat de
comptes de dépôt 191.609 1.000 2.09 179.265 1.037 2.31

   Total deposits         227,522          1,069          1.88       208,810          1,093          2.09
  FHLB short-term
borrowings                      -              1          0.00         2,868             36          5.02
  FHLB long-term
borrowings                 29,908            153          2.05        21,099            120          2.27
  FRB long-term
borrowings                 24,211             23          0.38             -              -             -
  Subordinated debt         7,876            130          6.60         7,843            130          6.63

Total

portant intérêt

liabilities               289,517          1,376          1.90 %     240,620          1,379          2.29 %
Non-interest-bearing
liabilities                63,933                                     

19 367

   Total liabilities      353,450                                    

259 987

Stockholders' Equity       26,307                                     

24 396

   Total liabilities
and Stockholders'
Equity                  $ 379,757                                  $ 

284 383

Net interest-earning
assets                  $  74,496                                  $  

31 330

Net interest income;
average interest rate
spread                                $    2,657          2.53 %                 $    2,098          2.82 %
Net interest margin
(3)                                                       2.92 %                                     3.09 %
Average
interest-earning
assets to average
interest-bearing
liabilities                                             125.73 %                                   113.02 %

________________________

*    Not meaningful.
(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 loan losses.
(3)  Equals net interest income divided by average interest-earning assets.

Provision for Loan Losses.  The Company's provision for loan losses increased
$229,000, or 301.3%, to $305,000 for the three months ended June 30, 2020 from
$76,000 for the three months ended June 30, 2019. The increase in the provision
for loan losses for the three months ended June 30, 2020 over the three months
ended June 30, 2019 was based on an evaluation of the allowance relative to such
factors as volume of the loan portfolio, concentrations of credit risk,
prevailing economic conditions, which includes the impact of the COVID-19
pandemic, prior loan loss experience and amount of non-performing loans at June
30, 2020.



                                       47
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Non-performing loans amounted to $1.4 million or 0.42% of net loans receivable
at June 30, 2020, consisting of eight loans, one loan is on non-accrual status
and seven loans are 90 days or more past due and accruing interest. Comparably,
non-performing loans amounted to $362,000 or 0.15% of net loans receivable at
December 31, 2019, consisting of two loans, one loan was on non-accrual status
and one loan was 90 days or more past due and accruing interest.  The
non-performing loans at June 30, 2020 include three one-to-four family non-owner
occupied residential loans, three commercial real estate loans, one one-to-four
family owner occupied residential loan, and one equipment loan, and all are
generally well-collateralized or adequately reserved for.  The allowance for
loan losses as a percent of total loans receivable was 0.77% at June 30, 2020
and 0.90% at December 31, 2019. Excluding PPP loans, which are 100% guaranteed
by the SBA, the allowance for loan losses to total loans was 1.04% at June 30,
2020.

Non-Interest Income.  Non-interest income decreased $78,000 or 5.4%, from $1.45
million for the three months ended June 30, 2019 to $1.37 million for the three
months ended June 30, 2020. The decrease was attributable to a $111,000, or
179.0%, decrease in other fees and service charges, a $41,000, or 4.7%, decrease
in net gain on loans held for sale, and a $3,000, or 9.0%, decrease in real
estate sales commissions, net.  The decrease in other fees and service charges
was primarily due to the increase in loan documentation expense, which was
netted against fee income, and the fact that the Company waived all fees during
the entire second quarter for all its customers in response to the COVID-19
pandemic. These decreases were partially offset by a $26,000, or 8.0%, increase
in mortgage banking and title abstract fees, an $18,000, or 52.9%, increase in
the gain on the sale of SBA loans, an $18,000 increase in gain on sales from
other real estate owned, a $14,000, or 13.2%, increase in insurance commissions,
and a $1,000, or 5.3% increase in income from bank-owned life insurance.

Non-Interest Expense.  Total non-interest expense increased $168,000, or 6.7%,
from $2.5 million for the three months ended June 30, 2019 to $2.7 million for
the three June 30, 2020, primarily due to a $44,000, or 25.3%, increase in
occupancy and equipment expense, a $42,000, or 35.6%, increase in data
processing expense, a $29,000, or 13.4%, increase in other expense, a $21,000,
or 22.8%, increase in professional fees, a $15,000, or 125.0%, increase in FDIC
deposit insurance assessment, a $13,000, or 0.7%, increase in salaries and
employee benefits expense, a $4,000, or 5.6% increase in advertising, and a
$4,000, or 100.0%, increase in other real estate owned expense. The increase in
occupancy and equipment expense was primarily attributable to the opening of our
new retail banking office in Philadelphia, Pennsylvania in February 2020. The
increase in data processing expense was due to an increase in transaction
deposit accounts. The increase in non-interest expense was partially offset by a
$4,000, or 7.1%, decrease in director's fees and expenses.

Provision for Income Tax.  The provision for income tax increased $18,000, or
6.5%, from $276,000 for the three months ended June 30, 2019 to $294,000 for the
three months ended June 30, 2020 due primarily to an increase in pre-tax income.

Comparaison des résultats d'exploitation pour les six mois terminés 30 juin 2020 et 2019


General.  Net income amounted to $1.2 million for the six months ended June 30,
2020, an increase of $85,000, or 7.9%, compared to net income of $1.1 million
for the six months ended June 30, 2019.  The increase in net income was
primarily the result of an increase in net interest income of $665,000, and an
increase in non-interest income of $387,000, partially offset by an increase in
non-interest expense of $688,000, an increase in the provision for loan losses
of $259,000, and an increase in the provision for income taxes of $20,000.

Net Interest Income.  The $665,000, or 15.7%, increase in net interest income
for the six months ended June 30, 2020 over the comparable period in 2019 was
driven by an $825,000, or 12.0%, increase in interest income, partially offset
by a $160,000, or 6.1%, increase in interest expense.


                                       48
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Interest Income.  Interest income increased $825,000, or 12.0%, to $7.7 million
for the six months ended June 30, 2020 from $6.9 million for the six months
ended June 30, 2019.  The increase in interest income was primarily due to a
$59.6 million increase in average loans receivable, net, including loans held
for sale, which increased from an average balance of $226.5 million for the six
months ended June 30, 2019 to an average balance of $286.1 million for the six
months ended June 30, 2020, and had the effect of increasing interest income
$1.7 million.  Offsetting this increase was a 45 basis point decrease in the
yield on average loans receivable, net, including loans held for sale, which
decreased from 5.60% for the six months ended June 30, 2019 to 5.15% for the six
months ended June 30, 2020, which had the effect of decreasing interest income
$643,000.  The increase in interest income was partially offset by a $4.0
million decrease in average cash and cash equivalents due from banks, interest
bearing, which decreased from an average balance of $23.6 million for the six
months ended June 30, 2019 to an average balance of $19.6 million for the six
months ended June 30, 2020, and had the effect of decreasing interest income
$48,000.  Also partially offsetting this increase was a 171 basis point decrease
in the yield on average cash and cash equivalents due from banks, interest
bearing, which decreased from 2.38% for the six months ended June 30, 2019 to
0.67% for the six months ended June 30, 2020, which had the effect of decreasing
interest income $167,000.

Interest Expense.  Interest expense increased $160,000, or 6.1%, to $2.8 million
for the six months ended June 30, 2020 from $2.6 million for the six months
ended June 30, 2019.  The increase in interest expense was primarily
attributable to a $14.2 million increase in average certificate of deposit
accounts which increased from an average balance of $175.9 million for the six
months ended June 30, 2019 to an average balance of $190.1 million for the six
months ended June 30, 2020, and had the effect of increasing interest expense
$160,000.  Partially offsetting this increase was an eight basis point decrease
in rate on average certificate of deposit accounts, which decreased from 2.25%
for the six months ended June 30, 2019 to 2.17% for the six months ended June
30, 2020, and had the effect of decreasing interest expense by $73,000.  The
increase in interest expense was also due to a $6.8 million increase in average
FHLB borrowings which increased from an average balance of $24.0 million for the
six months ended June 30, 2019 to an average balance of $30.8 million for the
six months ended June 30, 2020, and had the effect of increasing interest
expense $55,000.  Partially offsetting this increase was a 29 basis point
decrease in rate on average FHLB borrowings, which decreased from 2.45% for the
six months ended June 30, 2019 to 2.16% for the six months ended June 30, 2020,
and had the effect of decreasing interest expense by $17,000.  Also contributing
to the increase in interest expense was an increase in average Federal Reserve
Bank borrowings of $12.1 million for the six months ended June 30, 2020 which
had the effect of increasing interest expense by $23,000. The average interest
rate spread decreased from 2.91% for the six months ended June 30, 2019 to 2.68%
for the six months ended June 30, 2020 while the net interest margin decreased
from 3.16% for the six months ended June 30, 2019 to 3.02% for the six months
ended June 30, 2020.









                                       49
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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,
                                         2020                                       2019
                                                      Average                                    Average
                         Average                      Yield/        Average                      Yield/
                         Balance       Interest        Rate         Balance       Interest        Rate
                                                     (Dollars in thousands)
Interest-earning
assets:

Dû par les banques,
portant intérêt 19 600 $66 $ 0,67% 23 621 $281 $ 2,38%

 Investment in
interest-earning time
deposits                    9,990            124          2.48         9,090            123          2.71

Investissement

securities available
for sale                    7,892            101          2.56         7,439             98          2.63
 Loans receivable,
net (1) (2)               286,138          7,363          5.15       226,495          6,337          5.60
 Investment in FHLB
stock                       1,381             50          7.24         1,087             40          7.36
   Total
interest-earning
assets                    325,001          7,704          4.74 %     267,732          6,879          5.14 %
Non-interest-earning
assets                     14,274                                     11,913
   Total assets         $ 339,275$ 279,645
Interest-bearing
liabilities:
  Passbook accounts     $       6     $        *             * %   $      87     $        *             * %
  Savings accounts          1,863              2          0.21         1,486              1          0.13
  Money market
accounts                   30,138            121          0.80        27,676            110          0.79

Certificat de
comptes de dépôt 190.081 2.067 2.17 175.875 1.981 2.25

Total des dépôts 222.088 2.190 1.97 205.124 2092 2.04

  FHLB short-term
borrowings                  1,978             31          3.13         5,917             94          3.18
  FHLB long-term
borrowings                 28,779            300          2.08        18,066            199          2.20
  FRB long-term
borrowings                 12,106             23          0.38             -              -             -
  Subordinated debt         7,872            260          6.61         7,835            259          6.60

Total

portant intérêt

liabilities               272,823          2,804          2.06 %     236,942          2,644          2.23 %
Non-interest-bearing
liabilities                40,266                                     

18 527

   Total liabilities      313,089                                    

255 469

Stockholders' Equity       26,186                                     

24 176

   Total liabilities
and Stockholders'
Equity                  $ 339,275                                  $ 

279 645

Net interest-earning
assets                  $  52,178                                  $  

30 790

Net interest income;
average interest rate
spread                                $    4,900          2.68 %                 $    4,235          2.91 %
Net interest margin
(3)                                                       3.02 %                                     3.16 %
Average
interest-earning
assets to average
interest-bearing
liabilities                                             119.13 %                                   112.99 %

_______________________

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

Provision for Loan Losses.  The Company increased its provision for loan losses
by $259,000, or 160.9%, from $161,000 for the six months ended June 30, 2019 to
$420,000 for the six months ended June 30, 2020.  The increase in the provision
for loan losses was based on an evaluation of the allowance relative to such
factors as volume of the loan portfolio, concentrations of credit risk,
prevailing economic conditions, which includes the impact of the COVID-19
pandemic, prior loan loss experience and amount of non-performing loans at June
30, 2020.

Non-Interest Income.  Non-interest income increased $387,000, or 16.9%, for the
six months ended June 30, 2020 over the comparable period in 2019. The increase
in non-interest income for the six months ended June 30, 2020 was primarily
attributable to a $307,000, or 23.6%, increase in net gain on loans held for
sale, a $175,000, or 37.2%, increase in mortgage banking and title abstract
fees, a $19,000, or 9.6%, increase in insurance commissions, an $18,000 increase
in the gain on the sales of other real estate owned, and a $12,000, or 23.5%,
increase in real estate sales commission, net.  These increases were partially
offset by an $88,000, or 62.9%, decrease in gain on the sales of SBA loans, and
a $56,000, or 62.2%, decrease in other fees and service charges.


                                       50
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Non-Interest Expense.  Non-interest expense increased $688,000, or 14.2%, from
$4.8 million for the six months ended June 30, 2019 to $5.5 million for the six
months ended June 30, 2020 attributable to a $366,000, or 10.8%, increase in
salaries and employee benefits expense, an $89,000, or 26.7%, increase in
occupancy and equipment expense, a $77,000, or 35.0%, increase in data
processing expense, a $76,000, or 20.1%, increase in other expenses, a $53,000,
or 30.5%, increase in professional fees, an $11,000, or 100.0% increase in other
real estate owned expenses, an $8,000, or 5.6%, increase in advertising, a
$7,000, or 17.5% increase in the FDIC deposit insurance assessment, and a
$1,000, or 0.9% increase in directors' fees and expenses. The increase in
salaries and benefits expense is primarily due to expanding and improving the
level of staff at the Bank and its subsidiary companies. The increase in
occupancy and equipment expense was primarily attributable to the opening of our
new retail banking office in Philadelphia, Pennsylvania in February 2020. The
increase in data processing expense was due to an increase in transaction
deposit accounts.

Provision for Income Tax.  The provision for income tax increased $20,000, or
4.4%, from $450,000 for the six months ended June 30, 2019 to $470,000 for the
six months ended June 30, 2020 due primarily to an increase in pre-tax income.

Segments opérationnels


The Company's operations consist of two reportable operating segments: Banking
and Mortgage Banking. Our Banking Segment generates revenues primarily from its
lending, deposit gathering and fee business activities. Our Mortgage Banking
Segment originates residential mortgage loans which are sold into the secondary
market along with the loans' servicing rights.  Detailed segment information
appears in Note 12 in the Notes to Consolidated Financial Statements.

Our Banking Segment reported a pre-tax segment profit ("PTSP") for the three
months ended June 30, 2019 of $571,000, a $186,000, or 48.3%, increase from the
same period in 2019.  This increase in PTSP was due to a $574,000, or 27.0%,
increase in net interest income which was partially offset by decreases in
non-interest income, an increase in non-interest expense and an increase in the
provision for loan losses.  The increase in non-interest expense was due
primarily to increases in occupancy and equipment, data processing, professional
fees and other expenses.

Our Mortgage Banking Segment reported a PTSP for the three months ended June 30,
2020 of $454,000, a $102,000, or 18.3%, decrease from the same period in 2019.
The decrease in PTSP was primarily due to a decrease in non-interest income
which was driven by a decrease in net gain on the sale of loans and processing
fees, and an increase in non-interest expense.

Our Banking Segment reported a pre-tax segment profit ("PTSP") for the six
months ended June 30, 2020 of $750,000, a $160,000, or 17.6%, decrease from the
same period in 2019.  This decrease in PTSP was primarily due to a $605,000, or
15.2%, increase in non-interest expense. The increase in non-interest expense
was primarily driven by increases in salaries and employee benefits expense,
occupancy and equipment, data processing, professional fees, and other expenses.
This increase in non-interest expense was partially offset by a $275,000, or
6.7%, increase in net interest income.

Our Mortgage Banking Segment reported a PTSP for the six months ended June 30,
2020 of $883,000, a $265,000, or 42.9%, increase from the same period in 2019.
The increase in PTSP was primarily due to a $391,000, or 25.9%, increase in
non-interest income which was driven by an increase in net gain on the sale of
loans and processing fees.  This increase was partially offset by an $83,000, or
9.8%, increase in non-interest expense.

                                       51
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Liquidité et ressources en capital


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.  In addition, the Company invests excess funds
in short-term interest-earning assets that provide additional liquidity.  At
June 30, 2020, the Company's cash and cash equivalents amounted to $16.6
million.  At such date, the Company also had $3.1 million invested in
interest-earning time deposits maturing in one year or less.

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, 2020, Quaint Oak Bank had outstanding
commitments to originate loans of $14.0 million, commitments under unused lines
of credit of $12.5 million, and $2.1 million under standby letters of credit.

At June 30, 2020, certificates of deposit scheduled to mature in less than one
year totaled $116.6 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, 2020, we had $29.2
million of borrowings from the FHLB and had $160.6 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, 2020Quaint Oak Bank
had $825,812 in borrowing capacity with the Federal Reserve Bank (FRB) of
Philadelphia.  There were no borrowings under this facility at June 30, 2020.
The Bank also has borrowing capacity with the FRB under the PPPLF program in the
amount of outstanding pledged PPP loans.

Total stockholders' equity increased $1.0 million, or 3.9%, to $26.9 million at
June 30, 2020 from $25.9 million at December 31, 2019.  Contributing to the
increase was net income for the six months ended June 30, 2020 of $1.2 million,
the reissuance of treasury stock for exercised stock options of $101,000, common
stock earned by participants in the employee stock ownership plan of $89,000,
amortization of stock awards and options under our stock compensation plans of
$87,000, and the reissuance of treasury stock under the Bank's 401(k) Plan of
$49,000.  These increases were partially offset by dividends paid of $357,000,
the purchase of treasury stock of $112,000, and other comprehensive income, net
of $14,000. For further discussion of the stock compensation plans, see Note 10
in the Notes to Unaudited Consolidated Financial Statements contained elsewhere
herein.

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, 2020, Quaint Oak Bank exceeded each of its capital
requirements with ratios of 8.69%, 13.45%, 13.45% and 14.56%, respectively. As a
small savings and loan holding company eligible for exemption, the Company is
not currently subject to any regulatory capital requirements.

                                       52
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Arrangements hors bilan


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, 2020, we had unfunded commitments under lines of
credit of $12.5 million, $14.0 million of commitments to originate loans, and
$2.1 million under standby letters of credit.  We had no commitments to advance
additional amounts pursuant to outstanding lines of credit or undisbursed
construction loans.

Impact de l'inflation et de l'évolution des prix


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.

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