UNITED
      STATES
                                SECURITIES
      AND EXCHANGE COMMISSIONWashington,
      D.C.  20549FORM
      10-Q(Mark
      One)[X]
                              QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIESEXCHANGE
      ACT OF 1934For
      the quarterly period ended
                              March
      31, 2009OR[  
      ]
                              TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the transition period from
                              
                              toCommission
                              File
      Number:
                              000-52694QUAINT
      OAK BANCORP, INC.(Exact
      name of registrant as specified in its charter)Pennsylvania
                              
                              
                              35-2293957(State
      or other jurisdiction of
                              
                              (IRS
      Employer Identification No.)incorporation
      or organization)607
      Lakeside Drive, Southampton, Pennsylvania 18966(Address
      of principal executive offices)(215)
      364-4059(Registrant’s
      telephone number)(Former
      name, former address and former fiscal year, if changed since last
      report)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 [X]   No 
      [   ]Indicate
      by check mark whether the registrant has submitted electronically and
      posted on its corporate Web site, if any, every Interactive Data File
      required to be submitted and posted pursuant to Rule 405 of Regulation S-T
      (§232.405 of this chapter) during the preceding 12 months (or for such
      shorter period that the registrant was required to submit and post such
      files).   Yes [  
      ]    No  [   ]Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting
      company.  See the definitions of "large accelerated filer,"
      "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the
      Exchange Act. (Check one):Large
      accelerated filer    [   ]
                              Accelerated
      filer                     [ 
       ]Non-accelerated
      filer      [   ]
                              Smaller
      reporting company      
  [X](Do
      not check if smaller reporting
company)
 Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange
Act).   Yes  [   ]  No  
[X]


Indicate
the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date:  As of April 30, 2009,
1,323,089 shares of common stock were issued and outstanding.




INDEX
  PagePART
      I
                          -
                          FINANCIAL
      INFORMATIONItem
      1:
                          Financial
      Statements:Consolidated
      Balance Sheets as of March 31, 2009 and December31,
      2008 (Unaudited)
                          1Consolidated
      Statements of Income for the Three Months EndedMarch
      31, 2009 and 2008 (Unaudited)
                          2Consolidated
      Statement of Stockholders’ Equity for the ThreeMonths
      Ended March 31, 2009 (Unaudited)
                          3Consolidated
      Statements of Cash Flows for the Three MonthsEnded
      March 31, 2009 and 2008 (Unaudited)
                          4Notes
      to the Unaudited Consolidated Financial Statements
                          5Item
      2:
                          Management’s
      Discussion and Analysis of Financial Condition andResults
      of Operations
                          16Item
      3:
                          Qualitative
      and Quantitative Disclosures About Market Risk
                          22Item
      4:
                          Controls
      and Procedures
                          22PART
      II
                          -
                          OTHER
      INFORMATIONItem
      1:
                          Legal
      Proceedings
                          23Item
      1A:
                          Risk
      Factors
                          23Item
      2:
                          Unregistered
      Sales of Equity Securities and Use of Proceeds
                          23Item
      3:
                          Defaults
      upon Senior Securities
                          23Item
      4:
                          Submission
      of Matters to a Vote of Security Holders
                          23Item
      5:
                          Other
      Information
                          24Item
      6:
                          Exhibits
                          24SIGNATURES





PART I


ITEM 1. FINANCIAL
STATEMENTS
  Quaint Oak Bancorp,
Inc.
 Consolidated Balance
Sheets (Unaudited)
   At
      March 31,
                                      
                                      At
      December 31,2009
                                      
                                      2008ASSETS
                                      (In
      thousands, except share data)Due
      from banks, non-interest-bearing
                                      $    
      726
                                      
                                      $    
      490Due
      from banks, interest-bearing
                                      1,476
                                      
                                      545Cash and cash
      equivalents
                                      2,202
                                      
                                      1,035Investment
      in interest-earning time deposits
                                      3,760
                                      
                                      3,735Investment
      securities held to maturity (fair value-2009 $757; 2008
      $2,263)
                                      750
                                      
                                      2,250Mortgage-backed
      securities held to maturity (fair value-2009 $9,794; 2008
      $10,132)
                                      9,354
                                      
                                      9,777Loans
      receivable, net of allowance for loan losses2009
      $740; 2008 $689
                                      72,668
                                      
                                      69,310Accrued
      interest receivable
                                      390
                                      
                                      355Investment
      in Federal Home Loan Bank stock, at cost
                                      797
                                      
                                      797Premises
      and equipment, net
                                      60
                                      
                                      67Prepaid
      expenses and other assets
                                      1,217
                                      
                                      1,055Total Assets
                                      $91,198
                                      
                                      $88,381LIABILITIES
      AND STOCKHOLDERS' EQUITYLIABILITIESDeposits,
      interest-bearing
                                      
                                      $64,706
                                      
                                      $58,981Federal
      Home Loan Bank advances
                                      8,350
                                      
                                      11,150Accrued
      interest payable
                                      140
                                      
                                      138Advances
      from borrowers for taxes and insurance
                                      621
                                      
                                      729Accrued
      expenses and other liabilities
                                      105
                                      
                                      110Total Liabilities
                                      73,922
                                      
                                      71,108STOCKHOLDERS'
      EQUITYPreferred
      stock– $0.01 par value, 1,000,000 shares authorized; none issued or
      outstanding
                                      --
                                      
                                      --Common
      stock – $0.01 par value; 9,000,000 shares authorized;1,388,625
      issued and 1,333,089 and 1,352,021 outstandingat
      March 31, 2009 and December 31, 2008, respectively
                                      14
                                      
                                      14Additional
      paid-in capital
                                      13,436
                                      
                                      13,409Treasury
      stock, at cost: 2009 55,536 shares; 2008 36,604 shares
                                      (457)
                                      
                                      (312)Unallocated
      common stock held by:
                                        Employee
      Stock  Ownership Plan (ESOP)
                                      (935)
                                      
                                      (952)Recognition & Retention
      Plan Trust (RRP)
                                      (520)
                                      
                                      (520)Retained
      earnings
                                      5,738
                                      
                                      5,634Total Stockholders'
      Equity
                                      17,276
                                      
                                      17,273Total Liabilities and
      Stockholders’ Equity
                                      $91,198
                                      
                                      $88,381
 
 See
      accompanying notes to consolidated financial
    statements.


1




Quaint Oak Bancorp,
Inc.
 Consolidated Statements
of Income (Unaudited)
  For
      the Three Months EndedMarch
      31,2009
                            
                            2008Interest
      Income
                            (In
      thousands, except share data)Loans
      receivable, including fees
                            $1,193
                            
                            $1,049Short-term
      investments and investment securities
                            163
                            
                            128Dividends
                            --
                            
                            3Total
      Interest Income
                            1,356
                            
                            1,180Interest
      ExpenseDeposits
                            548
                            
                            612Federal
      Home Loan Bank advances
                            78
                            
                            --Total
      Interest Expense
                            626
                            
                            612Net
      Interest Income
                            730
                            
                            568Provision
      for Loan Losses
                            62
                            
                            37Net
      Interest Income after Provision for Loan Losses
                            668
                            
                            531Non-Interest
      Income - Fees and services charges
                            20
                            
                            11Non-Interest
      ExpenseSalaries
      and employee benefits
                            247
                            
                            182Directors’
      fees and expenses
                            53
                            
                            56Occupancy
      and equipment
                            23
                            
                            23Professional
      fees
                            94
                            
                            69Regulatory
                            18
                            
                            17Other
                            26
                            
                            35Total
      Other Expenses
                            461
                            
                            382Income
      before Income Taxes
                            227
                            
                            160Income
      Taxes
                            90
                            
                            63Net
      Income
                            $137
                            
                            $97Earnings
      per share – basic
                            $0.12
                            
                            $0.08Average
      shares outstanding - basic
                            1,189,263
                            
                            1,280,322Earnings
      per share - diluted
                            $0.12
                            
                            $0.08Average
      shares outstanding - diluted
                            1,189,263
                            
                            1,280,322




See
      accompanying notes to consolidated financial
    statements.


2


Quaint Oak Bancorp,
Inc.


Consolidated Statements
of Stockholders' Equity (Unaudited)






Three
      Months Ended March 31, 2009(In
      thousands, except share data)
                                                                                  
                                                                                  Common
      StockNumber
      of Shares
                                                                                      Outstanding
                                                                                  
                                                                                  
                                                                                  Amount
                                                                                  
                                                                                  
                                                                                  Additional
                                                                                    Paid-in
                                                                                    Capital
                                                                                  
                                                                                  
                                                                                  Treasury
                                                                                    Stock
                                                                                  
                                                                                  
                                                                                  Unallocated
                                                                                    Common
                                                                                    Stock
      Held
                                                                                    by
      ESOP
                                                                                  
                                                                                  
                                                                                  
                                                                                  Unallocated
      Common
                                                                                      Stock
      Held by RRP
                                                                                  
                                                                                  
                                                                                  Retained
      Earnings
                                                                                  
                                                                                  
                                                                                  Total
      Stockholders' EquityBALANCE
      – DECEMBER 31, 2008
                                                                                  
                                                                                  
                                                                                  1,352,021
                                                                                  
                                                                                  
                                                                                  $
                                                                                  14
                                                                                  
                                                                                  
                                                                                  $
                                                                                  13,409
                                                                                  
                                                                                  
                                                                                  $
                                                                                  (312
                                                                                  )
                                                                                  
                                                                                  $
                                                                                  (952
                                                                                  )
                                                                                  
                                                                                  
                                                                                  $
                                                                                  
                                                                                  (520
                                                                                  )
                                                                                  
                                                                                  $
                                                                                  5,634
                                                                                  
                                                                                  
                                                                                  $
                                                                                  17,273Common
      stock allocated by ESOP
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  (3
                                                                                  )
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  17
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  14Treasury
      stock purchased
                                                                                  
                                                                                  
                                                                                  (18,932
                                                                                  )
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  (145
                                                                                  )
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  (145
                                                                                  )Stock
      based compensation expense
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  30
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  30Cash
      dividends declared ($0.025 per share)
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  (33
                                                                                  )
                                                                                  
                                                                                  
                                                                                  (33
                                                                                  )Net
      income
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  
                                                                                  137
                                                                                  
                                                                                  
                                                                                  
                                                                                  137BALANCE
      – March  31, 2009
                                                                                  
                                                                                  
                                                                                  1,333,089
                                                                                  
                                                                                  
                                                                                  $
                                                                                  14
                                                                                  
                                                                                  
                                                                                  $
                                                                                  13,436
                                                                                  
                                                                                  
                                                                                  $
                                                                                  (457
                                                                                  )
                                                                                  
                                                                                  $
                                                                                  (935
                                                                                  )
                                                                                  
                                                                                  
                                                                                  $
                                                                                  
                                                                                  (520
                                                                                  )
                                                                                  
                                                                                  $
                                                                                  5,738
                                                                                  
                                                                                  
                                                                                  $
                                                                                  17,276



























See
      accompanying notes to consolidated financial
    statements.


3




Quaint Oak Bancorp,
Inc.
 Consolidated Statements
of Cash Flows (Unaudited)


For
      the Three Months EndedMarch
      31,2009
                    
                    
                    
                    2008Cash
      Flows from Operating Activities
                    
                    (In
      thousands)Net
      income
                    
                    $
                    137
                    
                    
                    
                    $
                    97Adjustments
      to reconcile net income to net cash provided by operating
      activities:Provision for loan
      losses
                    
                    
                    62
                    
                    
                    
                    
                    37Depreciation expense
                    
                    
                    7
                    
                    
                    
                    
                    6Net
      amortization (accretion) of securities premiums and
    discounts
                    
                    
                    (2
                    )
                    
                    
                    
                    1Amortization
      of deferred loan fees and costs
                    
                    
                    (3
                    )
                    
                    
                    
                    (2
                    )Stock-based
      compensation expense
                    
                    
                    44
                    
                    
                    
                    
                    17Changes in assets and liabilities which provided
      (used) cash:Accrued interest
      receivable
                    
                    
                    (35
                    )
                    
                    
                    
                    (32
                    )Prepaid expenses and other
      assets
                    
                    
                    46
                    
                    
                    
                    
                    (26
                    )Accrued interest
    payable
                    
                    
                    2
                    
                    
                    
                    
                    (11
                    )Accrued expenses and other
      liabilities
                    
                    
                    (5
                    )
                    
                    
                    
                    27Net
      Cash Provided by Operating Activities
                    
                    
                    253
                    
                    
                    
                    
                    114Cash
      Flows from Investing ActivitiesNet
      (increase) decrease in investment in interest-earning time
      deposits
                    
                    
                    (25
                    )
                    
                    
                    
                    119Purchase
      of investment securities available for sale
                    
                    
                    -
                    
                    
                    
                    
                    (506
                    )Proceeds
      from calls of investment securities held to maturity
                    
                    
                    1,500
                    
                    
                    
                    
                    --Principal
      payments on mortgage-backed securities
                    
                    
                    425
                    
                    
                    
                    
                    --Net
      increase in loans receivable
                    
                    
                    (3,625
                    )
                    
                    
                    
                    (1,893
                    )Net
      increase in Federal Home Loan Bank stock
                    
                    
                    --
                    
                    
                    
                    
                    (4
                    )Purchase
      of property and equipment
                    
                    
                    --
                    
                    
                    
                    
                    (35
                    )Net
      Cash Used in Investing Activities
                    
                    
                    (1,725
                    )
                    
                    
                    
                    (2,319
                    )Cash
      Flows from Financing ActivitiesNet
      increase in deposits
                    
                    
                    5,725
                    
                    
                    
                    
                    2,517Net
      decrease in short-term Federal Home Loan Bank advances
                    
                    
                    (2,800
                    )
                    
                    
                    
                    --Dividends
      paid
                    
                    
                    (33
                    )
                    
                    
                    
                    --Purchase
      of treasury stock
                    
                    
                    (145
                    )
                    
                    
                    
                    --Decrease
      in advances from borrowers for taxes and insurance
                    
                    
                    (108
                    )
                    
                    
                    
                    (88
                    )Net
      Cash Provided by Financing Activities
                    
                    
                    2,639
                    
                    
                    
                    
                    2,429Net Increase
      in Cash and Cash Equivalents
                    
                    
                    1,167
                    
                    
                    
                    
                    224Cash
      and Cash Equivalents – Beginning of Period
                    
                    
                    1,035
                    
                    
                    
                    
                    4,987Cash
      and Cash Equivalents – End of Period
                    
                    $
                    2,202
                    
                    
                    
                    $
                    5,211Supplementary
      Disclosure of Cash Flow and Non-Cash Information:Cash
      payments for interest
                    
                    $
                    624
                    
                    
                    
                    $
                    623Cash
      payments for income taxes
                    
                    $
                    --
                    
                    
                    
                    $
                    60Transfer
      of loans to other real estate owned
                    
                    $
                    208
                    
                    
                    
                    $
                    81






See
      accompanying notes to consolidated financial
    statements.


4




Quaint Oak Bancorp,
Inc.
 Notes to Unaudited
Consolidated Financial Statements
  Note
1 – Financial Statement Presentation and Significant Accounting
Policies
  Basis
of Presentation of Financial Presentation. On July 3, 2007, Quaint Oak Savings Bank completed its conversion
from a Pennsylvania chartered mutual savings bank to a Pennsylvania chartered
stock savings bank and changed its name to Quaint Oak Bank
(“Bank”).  In connection with the conversion, Quaint Oak Bank formed
Quaint Oak Bancorp, Inc., a Pennsylvania chartered corporation (the "Company" or
"Quaint Oak Bancorp"), which offered and sold 1,388,625 shares of its common
stock at a price of $10.00 per share to eligible depositors of the
Bank.  Upon completion of the conversion and the offering, all of
Quaint Oak Bank's common stock is owned by Quaint Oak Bancorp, and all of Quaint
Oak Bancorp's common stock is, in turn, owned by the public.  The
Company sold 1,388,625 shares of its common stock, raising $13,886,250 of gross
proceeds.  Costs incurred in connection with the conversion and
offering totaled $535,000 and were recorded as a reduction of the proceeds from
the offering.  The Company invested approximately $7.1 million or
53.0% of the net proceeds in Quaint Oak Bank.  All remaining proceeds
were retained by Quaint Oak Bancorp for future capital needs.  The
consolidated financial statements include the accounts of the Company and its
wholly owned subsidiary, Quaint Oak Bank.  All significant
intercompany balances and transactions have been
eliminated.
  Prior to
the conversion, Quaint Oak Savings Bank operated under a state bank charter as a
mutual savings bank.  Upon completion of the conversion and the
offering, the Bank changed its name to Quaint Oak Bank and began to operate as a
stock savings bank.  The Bank is subject to regulation by the
Pennsylvania Department of Banking and the Federal Deposit Insurance
Corporation.  Pursuant to the Bank’s election under Section 10(l) of
the Home Owners’ Loan Act, the Company is a savings and loan holding company
regulated by the Office of Thrift Supervision.  The market area served
by the Bank is principally Bucks County, Pennsylvania.  The principal
deposit products offered by the Bank are certificates of deposit, passbook
savings accounts, statement savings accounts and e-savings
accounts.  Loan products offered are fixed and adjustable rate
residential and commercial mortgages, construction loans, home equity loans,
lines of credit, and, to a lesser extent, auto loans.
  The
accompanying consolidated financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of America
(GAAP) for interim information and with the instructions to Form 10-Q, as
applicable to a smaller reporting company.  Accordingly, they do not
include all the information and footnotes required by GAAP for complete
financial statements.
  The
foregoing consolidated financial statements are unaudited; but in the opinion of
management include all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation thereof.  The balances
as of December 31, 2008 have been derived from the audited financial
statements.  These financial statements should be read in conjunction
with the financial statements and notes thereto included in Quaint Oak Bancorp’s
2008 Annual Report on Form 10-K.  The results of operations for
the three months ended March 31, 2009 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2009.
  Use
of Estimates in the Preparation of Financial Statements.The preparation
of the financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period.  Actual results could differ from those
estimates.  Material estimates that are particularly susceptible to
significant change in the near term relate to the determination of the allowance
for loan losses and the valuation of deferred tax
assets.
 5




Quaint Oak Bancorp,
Inc.
 Notes to Unaudited
Consolidated Financial Statements (Continued)
  Note
1 – Financial Statement Presentation and Significant Accounting Policies
(Continued)
  Share-Based
Compensation.The Company accounts for its share-based compensation
awards in accordance with Statement of Financial Accounting Standards (“SFAS”)
No. 123R (revised 2004) Share-Based
Payment.  This statement requires an entity to recognize the
cost of employee services received in share-based payment transactions and
measures the cost on the grant-date fair value of the award.  That
cost will be recognized over the period during which an employee is required to
provide service in exchange for the award.
  At March
31, 2009, the Company has two share-based plans; the 2008 Recognition and
Retention Plan (“RRP”) and the 2008 Stock Option Plan.  Awards under
both plans were made in May 2008.  These plans are more fully
described in Note 7.
  The
Company also has an employee stock ownership plan (“ESOP”).  This plan
is more fully described in Note 7.  Shares held under the ESOP are
accounted for in accordance with AICPA Statement of Position (“SOP”) 93-6, Employers’
Accounting for Employee Stock Ownership Plans.  As ESOP shares
are committed to be released and allocated among participants, the Company
recognizes compensation expense equal to the average market price of the shares
over the period earned.
  ComprehensiveIncome
(Loss).Accounting
principles generally accepted in the United States of America require that
recognized revenue, expenses, gains and losses be included in net
income.  Although certain changes in assets and liabilities, such as
unrealized gains and losses on available for sale securities, are reported as a
separate component of the equity section of the balance sheet, such items, along
with net income, are components of comprehensive
income.
  For the
three months ended March 31, 2008, unrealized holding losses on available for
sale securities were $6,000 with a related tax benefit of $3,000 for net other
comprehensive loss of $3,000.  The Company had no items of other
comprehensive income for the three months ended March 31, 2009.
  Earnings
per Share.Amounts reported in earnings per share reflect
earnings available to common stockholders’ for the period divided by the
weighted average number of shares of common stock outstanding during the period,
exclusive of unearned ESOP shares, unvested restricted stock (RRP) shares and
treasury shares.  Stock options and unvested restricted stock are
regarded as potential common stock and are considered in the diluted earnings
per share calculations to the extent they would have a dilutive effect if
converted to common stock, computed using the “treasury stock”
method.  For the three months ended March 31, 2009, all outstanding
stock options (108,311 shares) and unvested restricted stock (43,324 shares)
were antidilutive.  For the three months ended March 31, 2008, the
Company had no stock options or restricted stock
outstanding.
  Cash
and Cash Equivalents.Cash
and cash equivalents include non-interest and interest-earning demand deposits
and money market accounts with various commercial financial institutions, all of
which mature within ninety days.
  6


Quaint Oak Bancorp,
Inc.
 Notes to Unaudited
Consolidated Financial Statements (Continued)
  Note
1 – Financial Statement Presentation and Significant Accounting Policies
(Continued)
  Recent
Accounting Pronouncements.In
December 2007, the FASB issued Statement No. 141(R) Business
Combinations. This Statement establishes principles and requirements
for how the acquirer of a business recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed, and any
noncontrolling interest in the acquiree.  The Statement also provides
guidance for recognizing and measuring the goodwill acquired in the business
combination and determines what information to disclose to enable users of the
financial statements to evaluate the nature and financial effects of the
business combination.  This new pronouncement will impact the
Company’s accounting for business combinations after January 1,
2009.
  In March
2008, the FASB issued Statement No 161, Disclosures about
Derivative Instruments and Hedging Activities-and amendment of FASB Statement
No. 133 (Statement 161). Statement No. 161 requires entities that
utilize derivative instruments to provide qualitative disclosures about their
objectives and strategies for using such instruments, as well as any details of
credit-risk-related contingent features contained within
derivatives.  Statement 161 also requires entities to disclose
additional information about the amounts and location of derivatives located
within the financial statements, how the provisions of SFAS 133 has been
applied, and the impact that hedges have on an equity’s financial position,
financial performance, and cash flows.  Statement 161 is effective for
fiscal years and interim periods beginning after November 15, 2008, with earlier
application encouraged.  The Company adopted Statement  No.
161 on January 1, 2009. The adoption of this statement did not have any effect
on the Company’s consolidated financial position or results of
operations.
  In June
2008, the FASB issued Staff Position (FSP) EITF 03-6-1, Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating
Securities.  This FSP clarifies all outstanding unvested
share-based payment awards that contain rights to nonforfeitable dividends
participating securities in undistributed earnings with common
shareholders.  Awards of this nature are considered participating
securities and the two-class method of computing basic and diluted earnings per
share must be applied.  This FSP is effective for fiscal years
beginning after December 15, 2008 and interim periods within those
years.  The Company adopted Staff Position (FSP) EITF 03-6-1 on
January 1, 2009. The adoption of this staff position did not have any effect on
the Company’s consolidated financial position or results of
operations.
  In
September 2008, the FASB issued FSP 133-1 and FIN 45-4, Disclosures about
Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No.
133 and FASB Interpretation No. 45; and Clarification of the Effective Date of
FASB Statement No. 161 (FSP 133-1 and FIN 45-4).  FSP 133-1 and
FIN 45-4 amends and enhances disclosure requirements for sellers of credit
derivatives and financial guarantees.  It also clarifies that the
disclosure requirements of SFAS No. 161 are effective for quarterly periods
beginning after November 15, 2008, and fiscal years that include those
periods.  FSP 133-1 and FIN 45-4 is effective for reporting periods
(annual or interim) ending after November 15, 2008.  The Company
adopted FSP 133-1 and FIN 45-4 on January 1, 2009. The adoption of
this staff position did not have any effect on the Company’s consolidated
financial position or results of operations.
  In
November 2008, the SEC released a proposed roadmap regarding the potential use
by the U.S. issuers of financial statements prepared in accordance with
International Financial Reporting Standards (IFRS).  IFRS is a
comprehensive series of accounting standards published by the International
Accounting Standards Board (“IASB”).  Under the proposed roadmap, the
Company may be required to prepare financial statements in accordance with IFRS
as early as 2014.  The SEC will make a determination in 2011 regarding
the mandatory adoption of IFRS.  The Company is currently assessing
the impact that this potential change would have on its consolidated financial
statements, and will continue to monitor the development of the potential
implementation of IFRS.
 7
  Quaint Oak Bancorp,
Inc.
 Notes to Unaudited
Consolidated Financial Statements (Continued)
  Note
1 – Financial Statement Presentation and Significant Accounting Policies
(Continued)
 In April
2009, the Financial Accounting Standards Board (FASB) issued FASB Staff
Position (FSP) No. FAS 157-4, Determining Fair
Value When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not
Orderly(FSP
FAS 157-4).  FASB Statement 157, Fair Value
Measurements, defines fair value as the price that would be received to
sell the asset or transfer the liability in an orderly transaction (that is, not
a forced liquidation or distressed sale) between market participants at the
measurement date under current market conditions. FSP FAS 157-4 provides
additional guidance on determining when the volume and level of activity for the
asset or liability has significantly decreased. The FSP also includes guidance
on identifying circumstances when a transaction may not be considered
orderly.
  FSP FAS
157-4 provides a list of factors that a reporting entity should evaluate to
determine whether there has been a significant decrease in the volume and level
of activity for the asset or liability in relation to normal market activity for
the asset or liability. When the reporting entity concludes there has been a
significant decrease in the volume and level of activity for the asset or
liability, further analysis of the information from that market is needed and
significant adjustments to the related prices may be necessary to estimate fair
value in accordance with Statement 157.
  This FSP
clarifies that when there has been a significant decrease in the volume and
level of activity for the asset or liability, some transactions may not be
orderly. In those situations, the entity must evaluate the weight of the
evidence to determine whether the transaction is orderly. The FSP provides a
list of circumstances that may indicate that a transaction is not orderly. A
transaction price that is not associated with an orderly transaction is given
little, if any, weight when estimating fair value.
  This FSP
is effective for interim and annual reporting periods ending after June 15,
2009, with early adoption permitted for periods ending after March 15,
2009.  An entity early adopting FSP FAS 157-4 must also early adopt
FSP FAS 115-2 and FAS 124-2, Recognition and
Presentation of Other-Than-Temporary Impairments.  The Company
is currently reviewing the effect this new pronouncement will have on its
consolidated financial statements.
  In April
2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2, Recognition and
Presentation of Other-Than-Temporary Impairments (FSP FAS 115-2 and FAS
124-2).   FSP FAS 115-2 and FAS 124-2 clarifies the interaction
of the factors that should be considered when determining whether a debt
security is other-than-temporarily impaired. For debt securities, management
must assess whether (a) it has the intent to sell the security and
(b) it is more likely than not that it will be required to sell the
security prior to its anticipated recovery. These steps are done before
assessing whether the entity will recover the cost basis of the investment.
Previously, this assessment required management to assert it has both the intent
and the ability to hold a security for a period of time sufficient to allow for
an anticipated recovery in fair value to avoid recognizing an
other-than-temporary impairment. This change does not affect the need to
forecast recovery of the value of the security through either cash flows or
market price.
  In
instances when a determination is made that an other-than-temporary impairment
exists but the investor does not intend to sell the debt security and it is not
more likely than not that it will be required to sell the debt security prior to
its anticipated recovery, FSP FAS 115-2 and FAS 124-2 changes the presentation
and amount of the other-than-temporary impairment recognized in the income
statement. The other-than-temporary impairment is separated into (a) the
amount of the total other-than-temporary impairment related to a decrease in
cash flows expected to be collected from the debt security (the credit loss) and
(b) the amount of the total other-than-temporary impairment related to all
other factors. The amount of the total other-than-temporary impairment related
to the credit loss is recognized in earnings.
  8
  Quaint Oak Bancorp,
Inc.
 Notes to Unaudited
Consolidated Financial Statements (Continued)
  Note
1 – Financial Statement Presentation and Significant Accounting Policies
(Continued)
 The
amount of the total other-than-temporary impairment related to all other factors
is recognized in other comprehensive income.
  This FSP
is effective for interim and annual reporting periods ending after June 15,
2009, with early adoption permitted for periods ending after March 15,
2009.  An entity early adopting FSP FAS 115-2 and FAS 124-2 must also
early adopt FSP FAS 157-4,Determining Fair
Value When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not
Orderly.  The Company is currently reviewing the effect this
new pronouncement will have on its consolidated financial
statements.
  In April
2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, Interim Disclosures
about Fair Value of Financial Instruments (FSP FAS 107-1 and APB
28-1).  FSP FAS 107-1 and APB 28-1 amends FASB Statement No. 107,
Disclosures
about Fair Value of Financial Instruments, to require disclosures about
fair value of financial instruments for interim reporting periods of publicly
traded companies as well as in annual financial statements. This FSP also amends
APB Opinion No. 28, Interim Financial
Reporting, to require those disclosures in summarized financial
information at interim reporting periods.
  This FSP
is effective for interim and annual reporting periods ending after June 15,
2009, with early adoption permitted for periods ending after March 15,
2009.  An entity early adopting FSP FAS 107-1 and APB 28-1 must also
early adopt FSP FAS 157-4,Determining Fair
Value When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not Orderly
and FSP FAS 115-2 and FAS 124-2, Recognition and
Presentation of Other-Than-Temporary Impairments. The
Company is currently reviewing the effect this new pronouncement will have on
its consolidated financial statements.
  Reclassifications.Certain
items in the 2008 consolidated financial statements have been reclassified to
conform to the presentation in the 2009 financial statements.  Such
reclassifications did not have a material impact on the overall financial
statements.
 9




Quaint Oak Bancorp,
Inc.
 Notes to Unaudited
Consolidated Financial Statements (Continued)
  Note
2 – Investment
Securities
   The amortized cost and
fair value of investment securities held to maturity at March 31, 2009 and
December 31, 2008 are summarized below (in
thousands):
 March
      31, 2009Amortized
                    Cost
                  Gross
                      Unrealized
                      Gains
                  Gross
                      Unrealized
                      Losses
                  Estimated
                    Fair
      ValueHeld
      to Maturity:U.S. Government agency
      securities
                  $750
                  $7
                  $--
                  $757December
      31, 2008Amortized
                    Cost
                  Gross
                      Unrealized
                      Gains
                  Gross
                      Unrealized
                      Losses
                  Estimated
                    Fair
      ValueHeld
      to Maturity:U.S. Government agency
      securities
                  $2,250
                  $13
                  $--
                  $2,263








Note
3 – Mortgage-backed Securities
  The amortized cost and fair value mortgage-backed
securities held to maturityat March 31,
2009 and December 31, 2008 are summarized below (in
thousands):
  March
      31, 2009Amortized
                  Cost
                Gross
                    Unrealized
                    Gains
                Gross
                    Unrealized
                    Losses
                Estimated
                  Fair
      ValueHeld
      to Maturity:FNMA pass-through
      certificates
                $4,830
                $238
                $--
                $5,068FHLMC pass-through
      certificates
                4,524
                202
                --
                4,726$9,354
                $440
                $--
                $9,794December
      31, 2008Amortized
                  Cost
                Gross
                    Unrealized
                    Gains
                Gross
                    Unrealized
                    Losses
                Estimated
                  Fair
      ValueHeld
      to Maturity:FNMA pass-through
      certificates
                $5,025
                $202
                $--
                $5,227FHLMC pass-through
      certificates
                4,752
                153
                --
                4,905$9,777
                $355
                $--
                $10,132
  10




Quaint Oak Bancorp,
Inc.
 Notes to Unaudited
Consolidated Financial Statements (Continued)
  Note 4 - Loans Receivable, Net and Allowance for Loan
Losses
  Loans
receivable, net consist of the following (in thousands):
  March
      31,
                    2009
                  December
      31,
                    2008Real
      estate loans:One-to four-family
      residential:Owner occupied
                  $17,693
                  $17,460Non-owner
    occupied
                  23,229
                  21,489Total one-to-four family
      residential
                  40,922
                  38,949Multi-family
      residential
                  3,270
                  3,526Commercial real
      estate
                  19,071
                  19,096Construction
                  3,552
                  2,752Commercial lines
      of  credit
                  966
                  813Home equity
    loans
                  5,457
                  4,585Total real estate
      loans
                  73,238
                  69,721Auto
      loans
                  109
                  103Loans
      secured by deposits
                  6
                  109Total loans
                  73,353
                  69,933Deferred
      loan fees and costs
                  55
                  66Allowance
      for loan losses
                  (740)
                  (689)Net loans
                  $72,668
                  $69,310






Following
is a summary of changes in the allowance for loan losses for the three months
ended March 31, 2009 and 2008 (in thousands):
  March
      31,
                    2009
                
                March
      31,
                    2008Balance,
      beginning of the year
                $689
                $667Provision for loan
      losses
                62
                37Charge-offs
                (11)
                --Recoveries
                --
                --(Charge-offs)/recoveries,
      net
                (11)
                --Balance,
      end of period
                $740
                $704


11




Quaint Oak Bancorp,
Inc.
 Notes to Unaudited
Consolidated Financial Statements (Continued)
  Note
5 – Deposits
  Deposits
consist of the following classifications (in thousands):
  March
      31,
                    2009
                  December
      31,
                      2008Passbook
      savings accounts
                  $
      3,391
                  $
      3,356Statement
      and e-savings accounts
                  6,327
                  5,522Certificates
      of deposit
                  54,988
                  50,103Total
      deposits
                  $64,706
                  $58,981
   Note
6 – Federal Home Loan Bank Advances
  Federal
Home Loan Bank advances consist of the following at March 31, 2009 (in
thousands):
 Maturity Period
                  Amount
                  
                  Weighted
                    Interest
      Rate1
      to 12 months
                  $1,500
                  
                  3.06%13
      to 24 months
                  1,250
                  
                  3.38%25
      to 36 months
                  1,800
                  
                  3.66%37
      to 48 months
                  1,800
                  
                  3.98%49
      to 60 months
                  2,000
                  
                  4.19%Total
                  $8,350
                  
                  3.70%






Note
7 – Stock Compensation Plans
  Employee
Stock Ownership Plan
  The
Company adopted an Employee Stock Ownership Plan (ESOP) during fiscal 2007 for
the benefit of employees who meet the eligibility requirements of the
plan.  Using proceeds from a loan from the Company, the ESOP purchased
8%, or 111,090 shares of the Company’s common in the open market at an average
price of $9.35 for a total of $1.0 million.  The Bank makes cash
contributions to the ESOP on a quarterly basis sufficient to enable the ESOP to
make the required loan payments to the Company.  The loan bears an
interest rate equal to the Prime Rate as published in the Wall Street Journal,
with principal and interest to be paid quarterly in equal installments over 15
years. The loan is secured by the unallocated shares of common stock held by the
ESOP.
  Shares of the Company’s
common stock purchased by the ESOP are held in a suspense account and reported
as unallocated common stock held by the ESOP in stockholders’ equity until
released for allocation to participants.  As the debt is repaid,
shares are released from collateral and are allocated to each eligible
participant based on the ratio of each such participant’s base compensation to
the total base compensation of eligible plan participants.  As the
unearned shares are committed to be released and allocated among participants,
the Company recognizes compensation expense equal to the average price of the
shares, and the shares become outstanding for earnings per share
computations.
 12




Quaint Oak Bancorp,
Inc.
 Notes to Unaudited
Consolidated Financial Statements (Continued)
  Note
7 – Stock Compensation Plans (Continued)
  Employee Stock Ownership Plan(Continued)
  During the three months
ended March 31, 2009 and 2008, the Company recognized $14,000 and $17,000 of
ESOP expense, respectively.
  Recognition
and Retention Plan
  In May
2008, the shareholders of Quaint Oak Bancorp approved the adoption of the 2008
Recognition and Retention Plan (the “2008 RRP”) and Trust
Agreement.  In order to fund the 2008 RRP, the 2008 Recognition and
Retention Plan Trust (the “2008 Trust”) acquired 55,545 shares of the Company’s
stock in the open market at an average price of $9.36 totaling $520,000 as of
December 31, 2008.  Pursuant to the 2008 RRP, 43,324 shares acquired
by the 2008 Trust were granted to certain officers, employees and directors of
the Company in May 2008 with 12,221 shares remaining available for future
grant.  The 2008 RRP shares have vesting periods from five to seven
years.
  A
summary of the status of the shares under the 2008 RRP as of March 31, 2009 is
as follows:
  Number
      of
                        Shares
                      
                      WeightedAverage
                        Grant
      Date Fair ValueUnvested
      at December 31, 2008
                      43,324
                      
                      $9.05Granted
                      --
                      
                      --Vested
                      --
                      
                      --Forfeited
                      --
                      
                      --Unvested
      at March 31, 2009
                      43,324
                      
                      $9.05
  The
weighted average grant date fair value is the last sale price as quoted on the
OTC Bulletin Board on May 14, 2008.  Compensation expense on the 2008
RRP shares granted is recognized ratably over the five to seven year vesting
period in an amount which is equal to the fair value of the common stock at the
date of grant.  During the three months ended March 31, 2009, $19,000
in compensation expense was recognized.  A tax benefit of
approximately $6,000 was recognized during this period.  As of March
31, 2009, approximately $324,000 in additional compensation expense will be
recognized over the remaining service period of approximately 4.2
years.
  Stock
Options
  In May
2008, the shareholders of Quaint Oak Bancorp approved the adoption of the 2008
Stock Option Plan (the “2008 Option Plan”).  The 2008 Option Plan
authorizes the grant of stock options to officers, employees and directors of
the Company to acquire 138,863 shares of common stock with an exercise price no
less than the fair market value on the date of the grant.  The
Compensation Committee of the Board of Directors determined to grant the stock
options in May 2008 at an exercise price equal to $10.00 per share which is
higher than the fair market value of the common stock on the grant
date.  All incentive stock options issued under the 2008 Option Plan
are intended to comply with the requirements of Section 422 of the Internal
Revenue.  Options will become vested and exercisable over a five to
seven year period and are generally exercisable for a period of ten years after
the grant date.  Pursuant to the 2008 Option Plan, 108,311 stock
options were granted to certain officers, employees and directors of the Company
in May 2008 with 30,552 stock options remaining available for future
grant.
 13
  Quaint Oak Bancorp,
Inc.
 Notes to Unaudited
Consolidated Financial Statements (Continued)
  Note
7 – Stock Compensation Plans (Continued)
  Stock Options
(Continued)  A summary
of the status of the Company’s stock options under the 2008 Option Plan as of
March 31, 2009 is a follows:
  Number
      of Shares
                          
                          Weighted
      Average Exercise Price
                          
                          Weighted
      Average Remaining Contractual
                            Life
      (in years)
                          
                          Aggregate
      Intrinsic
                            Value
 Outstanding
      December 31, 2008
                            108,311
                            
                            $10.00
                            
                            9.4
                            
                            $--Granted
                            --
                            
                            --
                            
                            --
                            
                            --Vested
                            --
                            
                            --
                            
                            --
                            
                            --Forfeited
                            --
                            
                            --
                            
                            --
                            
                            --Outstanding
      at March 31, 2009
                            108,311
                            
                            $10.00
                            
                            9.1
                            
                            $--Exercisable
      at March 31, 2009
                            --
  The
estimated fair value of the options granted in May 2008 was $2.01 per
share.The
fair value was estimated on the date of grant in accordance with SFAS No. 123R
using the Black-Scholes option pricing model with the following
assumptions:
  Expected
      dividend yield
                        1.10%Risk-free
      interest rate
                        3.5%Expected
      life of options
                        7.5 yearsExpected
      stock-price volatility
                        19.45%
  The
dividend yield was calculated on the dividend amount and stock price existing at
the grant date.  The risk free interest rate used was based on the
rates of United States Treasury securities with maturities equal to the expected
lives of the options.  Although the contractual term of the options
granted is ten years, the expected term of the options is less.  As
the Company has no history of granting stock option awards, management estimated
the expected term of the stock options to be the average of the vesting period
and the contractual term.  The expected stock-price volatility was
estimated by considering the Company’s own stock volatility for the period since
July 5, 2007, the initial trading date.  The actual future volatility
may differ from our historical volatility.  The aggregate intrinsic
value for outstanding stock options is calculated based on the difference
between the exercise price of the underlying awards and the market price of our
common stock as of the reporting date.  There was no intrinsic value
of the options outstanding as of March 31, 2009 as all of the outstanding
options were at exercise prices greater than the March 31, 2009 stock
price.
  During
the three months ended March 31, 2009, approximately $11,000 was recognized in
compensation expense for the 2008 Option Plan.  A tax benefit of
approximately $2,000 was recognized during this period.  At March 31,
2009, approximately $173,000 in additional compensation expense for awarded
options remained unrecognized.  This expense will be recognized over
approximately 4.2 years.
 14




Quaint Oak Bancorp,
Inc.
 Notes to Unaudited
Consolidated Financial Statements (Continued)
  Note
8 – Fair Value
  In
September 2006, the Financial Accounting Standards Board (“FASB”) issued
Statement No. 157, Fair Value
Measurements (“SFAS 157”), which defines fair value, establishes a
framework for measuring fair value under GAAP, and expands disclosures about
fair value measurements.  SFAS 157 applies to other accounting
pronouncements that require or permit fair value measurements.  The
Company adopted SFAS 157 effective for its fiscal year beginning January 1,
2008.
  SFAS 157
establishes a fair value hierarchy that prioritizes the inputs to valuation
methods used to measure fair value.  The hierarchy gives the highest
priority to unadjusted quoted prices in active markets for identical assets or
liabilities (Level 1 measurements) and the lowest priority to unobservable
inputs (Level 3 measurements).  The three levels of the fair value
hierarchy under SFAS 157 are as follows:
  Level
      1:
                                      Unadjusted
      quoted prices in active markets that are accessible at the measurement
      date for identical, unrestricted assets or liabilities.Level
      2:
                                      Quoted
      prices in markets that are not active, or inputs that are observable
      either directly or indirectly, for substantially the full term of the
      asset or liability.Level
      3:
                                      Prices
      or valuation techniques that require inputs that are both significant to
      the fair value measurement and unobservable (i.e., supported with little
      or no market
activity).
 
  
 
 An
asset’s or liability’s level within the fair value hierarchy is based on the
lowest level of input that is significant to the fair value
measurement.
  The
Company had no financial assets to be measured at fair value on a
recurring at March 31, 2009 and December 31, 2008.
  For
assets measured at fair value on a non-recurring basis, the fair value
measurements by level within the fair value hierarchy used at March 31, 2009 are
as follows (in thousands):
  Carrying
      Value
                  Quoted
      Prices in
                      Active
      Markets
                      for
      Identical
                      Assets
                      (Level
      1)
                  Significant
      Other Observable
                      Inputs
                      (Level
      2)
                  Significant
      Other
                      Observable
                      Inputs
                      (Level
      3)
 Other
      real estate owned
                    $940
                    $--
                    $--
                    $940
  For the
three months ended March 31, 2009, $208,000 of other real estate owned was
transferred in with no losses included in earnings.
 15
  ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
  Forward-Looking
Statements
  We make certain statements in this document as to what
we expect may happen in the future. These statements usually contain the words
"believe," "estimate," "project," "expect," "anticipate," "intend" or similar
expressions. Because these statements look to the future, they are based on our
current expectations and beliefs. Actual results or events may differ materially
from those reflected in the forward-looking statements. You should be aware that
our current expectations and beliefs as to future events are subject to change
at any time, and we can give you no assurances that the future events will
actually occur.
  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 now 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,
professional fees 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.
  Critical
Accounting Policies
  The accounting and financial reporting policies of the
Company conform to accounting principles generally accepted in the United States
of America and to general practices within the banking industry. Accordingly,
the consolidated financial statements require certain estimates, judgments, and
assumptions, which are believed to be reasonable, based upon the information
available. These estimates and assumptions affect the reported amounts of assets
and liabilities at the date of the financial statements and the reported amounts
of income and expenses during the periods presented. 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.
  Allowance for Loan
Losses.  The allowance for loan losses is established through a
provision for loan losses charged to expense. Loans are charged against the
allowance for loan losses when management believes that the collectibility of
the principal is unlikely. Subsequent recoveries are added to the allowance. The
allowance is an amount that management believes will cover known and inherent
losses in the loan portfolio, based on evaluations of the collectibility of
loans. The evaluations take into consideration such factors as changes in the
types and amount of loans in the loan portfolio, historical loss experience,
adverse situations that may affect the borrower's ability to repay, estimated
value of any underlying collateral, estimated losses relating to specifically
identified loans, and current economic conditions. This evaluation is inherently
subjective as it requires material estimates including, among others, exposure
at default, the amount and timing of expected future cash flows on impaired
loans, value of collateral, estimated losses on our commercial and residential
loan portfolios and general amounts for historical loss
experience.  All of these estimates may be susceptible to significant
change.
 16
 While management uses the best information available to
make loan loss allowance evaluations, adjustments to the allowance may be
necessary based on changes in economic and other conditions or changes in
accounting guidance. Historically, our estimates of the allowance for loan
losses have not required significant adjustments from management's initial
estimates. In addition, the Pennsylvania Department of Banking and the Federal
Deposit Insurance Corporation, as an integral part of their examination
processes, periodically review our allowance for loan losses.  The
Pennsylvania Department of Banking and the Federal Deposit Insurance Corporation
may require the recognition of adjustments to the allowance for loan losses
based on their judgment of information available to them at the time of their
examinations. To the extent that actual outcomes differ from management's
estimates, additional provisions to the allowance for loan losses may be
required that would adversely impact earnings in future
periods.
  Other-Than-Temporary
Impairment of Securities.Securities are evaluated on at
least a quarterly basis, and more frequently when market conditions warrant such
an evaluation, to determine whether a decline in their value is
other-than-temporary.  To determine whether a loss in value is
other-than-temporary, management utilizes criteria such as the reasons
underlying the decline, the magnitude and duration of the decline and the intent
and ability of the Company to retain its investment in the security for the
period of time sufficient to allow for an anticipated recovery in the fair
value.   The term “other-than-temporary” is not intended to
indicate that the decline is permanent, but indicates that the prospects for a
near-term recovery of value is not necessarily favorable, or that there is a
lack of evidence to support a realizable value equal to or greater than the
carrying value of the investment.  Once a decline in value is
determined to be other-than-temporary, the value of the security is reduced and
a corresponding charge to earnings is recognized.
  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 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.
  Comparison
of Financial Condition at March 31, 2009 and December 31, 2008
  Total
Assets.The Company’s total assets
at March 31, 2009 were $91.2 million, an increase of $2.8 million, or 3.2%, from
$88.4 million at December 31, 2008.  This increase was primarily due to
growth in loans receivable, net of the allowance for loan losses, of $3.4
million and cash and cash equivalents of $1.2 million.  Offsetting
these increases was a decline in investment securities of $1.5 million and a
decline in mortgage-backed securities of $423,000.  Asset growth for
the three months ended March 31, 2009 was primarily funded by a $5.7 million
increase in deposits.  Deposit growth was also used to pay-down FHLB
advances of $2.8 million.
  Cash and Cash
Equivalents.Cash and cash equivalents increased $1.2 million, or 112.8%,
from $1.0 million at December 31, 2008 to $2.2 million at March 31, 2009 as
proceeds from the calls of investment securities held to maturity were invested
in more liquid money market accounts.
  Investment
Securities.Investment securities held to maturity decreased
$1.5 million, or 66.7%, from $2.3 million at December 31, 2008 to $750,000 at
March 31, 2009 as $1.5 million of securities  were
called.  During this same period, mortgage-backed securities held to
maturity decreased $423,000, or 4.3% due to principal payments on these
securities.
 17
 Loans Receivable,
Net. Loans receivable, net, increased $3.4 million, or 4.8%, to $72.7
million at March 31, 2009 from $69.3 million at December 31,
2008.  This increase was funded primarily by the $5.7 million increase
in deposits.  Increases within the portfolio occurred in the
residential mortgage one-to-four family non-owner occupied category, which grew
$1.7 million or 8.1%, home equity loans which increased $872,000 or 19.0%,
construction loans which grew $800,000 or 29.1%, residential mortgage
one-to-four family owner occupied loans which increased $233,000 or 1.3% and
commercial lines of credit which increased $153,000 or 18.8% as the Company
continues its strategy of diversifying its loan portfolio with higher yielding
and shorter-term loan products.  These increases were partially offset
by decreases of $256,000 or 7.3% in multi-family residential loans and $103,000
or 94.5% in loans secured by deposits.  Decreases in these loan
categories are attributable to normal amortization and
pay-offs.
  Deposits. Total
interest-bearing deposits increased $5.7 million, or 9.7%, to $64.7 million at
March 31, 2009 compared to $59.0 million at December 31,
2008.This increase was attributable to increases of $4.9
million in certificates of deposit, $597,000 in e-savings accounts, $208,000 in
statement savings accounts, and $35,000 in passbook accounts. The increase in
deposits was primarily due to the competitive interest rates offered by the Bank
and investors seeking the safety of insured bank
deposits.
  Federal Home Loan
Bank Advances. Federal Home Loan Bank advances decreased $2.8 million
from $11.2 million at December 31, 2008 to $8.4 million at March 31, 2009 as the
Company used excess liquidity to pay-off short-term
Federal Home Loan Bank advances.
  Stockholders’
Equity.Total
stockholders’ equity increased $3,000 to $17.3 million at March 31,
2009.  This small increase from December 31, 2008 was the result of
net income for the three months ended March 31, 2009 of $137,000, and a decrease
in unallocated shares held by the ESOP of $17,000 and $27,000 of compensation
expense related to stock compensation plans, offset by the purchase of 18,932
shares of the Company’s common stock in the open-market as part of the Company’s
stock repurchase program for an aggregate purchase price of $145,000, and
dividends paid of $33,000.
  Comparison
of Operating Results for the Three Months Ended March 31, 2009 and
2008
  Net
Income.Net income amounted to $137,000 for the three months
ended March 31, 2009, an increase of $40,000, or 41.2% compared to net income of
$97,000 for the same period in 2008.  The increase in net income on a
quarter over quarter basis was primarily the result of an increase of $162,000
in net interest income and a $9,000 increase in non-interest income, which were
offset by a $25,000 increase in the provision for loan losses, a $79,000
increase in non-interest expense, and a $27,000 increase in income tax
expense.  The increase in non-interest expense was primarily
attributable to a $65,000 increase in salaries and employee benefits and a
$25,000 increase in professional fees for the three months ended March 31, 2009
compared to the same period in 2008.
  Net Interest
Income.  Net interest income increased $162,000, or 28.5%, to
$730,000 for the three months ended March 31, 2009 from $568,000 for the
comparable period in 2008.  The increase was driven by an increase in
interest income of $176,000, offset by a $14,000 increase in interest
expense.
  Interest
Income.  Interest income increased $176,000, or 14.9% for the
three months ended March 31, 2009 from $1.2 million for the three months ended
March 31, 2008.  The increase resulted primarily from a $13.7 million
increase in average interest-earning assets which had the effect of increasing
interest income by $215,000.  This increase in volume was partially
offset by a $39,000 decrease in interest income resulting from a 21 basis point
decrease in the overall yield on interest-earning assets to 6.24% for the three
months ended March 31, 2009 from 6.45% for the three months ended March 31,
2008.
 18
 The growth in average interest-earnings assets between
the two periods can be attributed primarily to the increase in average
mortgage-backed securities of $9.3 million and average net loans receivable of
$9.2 million, offset by a $4.6 million decrease in average short-term
investments and investment securities.  The increase in average net
loans receivable was funded by the increase in average interest-bearing deposits
and the re-deployment of short-term investments, while the increase in
mortgage-backed securities was driven by the $9.4 million increase in average
FHLB advances.  The average yield on loans decreased to 6.73% for the
three months ended March 31, 2009 from 6.80% for the three months ended March
31, 2008. The decrease in yield was the result of the current
interest rate environment in which the Federal Reserve Board’s Open Market
Committee cut the federal funds rate by 200 basis points from March 2008 to
March 2009.
  Interest
Expense.  Interest expense increased by $14,000, or 2.3%, to
$626,000 for the three months ended March 31, 2009 compared to the same period
in 2008.  The increase resulted primarily from an $15.1 million
increase in average interest-bearing liabilities, which had the effect of
increasing interest expense by $144,000.  This increase in volume was
offset by a $130,000 decrease in interest expense resulting from an 84 basis
point decrease in the overall cost of interest-bearing liabilities to 3.50% for
the three months ended March 31, 2009 from 4.34% for the three months ended
March 31, 2008.  The
increase in the average balance of interest-bearing liabilities was primarily
driven by the growth in certificates of deposit due to customer interest in
higher yielding secure investments and the increase in FHLB
advances.  The decrease in rates was consistent with the decrease in
market interest ratesfrom March 2008 to March
2009.
  Average Balances,
Net Interest Income, and 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 March 31,2009
                        
                        2008Average
                          Balance
                        
                        Interest
                        
                        Average
                          Yield/
                          Rate
                        
                        Average
                          Balance
                        
                        Interest
                        
                        Average
                          Yield/
                          RateInterest-earning
      assets:
                        (Dollars
      in thousands)Short-term investments and
      investment securities
                        $
      6,723
                        
                        $     51
                        
                        3.03
                        %
                        
                        $11,276
                        
                        $    128
                        
                        4.54
                        %Mortgage-backed
      securities
                        9,302
                        
                        112
                        
                        4.82
                        
                        
                        --
                        
                        --
                        
                        --Loans receivable, net
      (1)
                        70,942
                        
                        1,193
                        
                        6.73
                        
                        
                        61,707
                        
                        1,049
                        
                        6.80Other interest-earning
      assets
                        --
                        
                        --
                        
                        --
                        
                        
                        241
                        
                        3
                        
                        4.98Total interest-earning
      assets
                        86,967
                        
                        1,356
                        
                        6.24
                        %
                        
                        73,224
                        
                        1,180
                        
                        6.45
                        %Non-interest-earning
      assets
                        2,747
                        
                        
                        
                        
                        
                        1,526Total assets
                        $89,714
                        
                        
                        
                        
                        
                        $74,750Interest-bearing
      liabilities:Passbook accounts
                        $
      3,368
                        
                        8
                        
                        0.95
                        %
                        
                        $  3,569
                        
                        12
                        
                        1.34
                        %Statement and e-savings
      accounts
                        6,077
                        
                        29
                        
                        1.91
                        
                        
                        5,483
                        
                        38
                        
                        2.77Certificate of deposit
      accounts
                        52,650
                        
                        511
                        
                        3.88
                        
                        
                        47,335
                        
                        562
                        
                        4.75Total deposits
                        62,095
                        
                        548
                        
                        3.53
                        
                        
                        56,387
                        
                        612
                        
                        4.34FHLB
      advances
                        9,432
                        
                        78
                        
                        3.31
                        
                        
                        --
                        
                        --
                        
                        --Total interest-bearing
      liabilities
                        71,527
                        
                        626
                        
                        3.50
                        %
                        
                        56,387
                        
                        612
                        
                        4.34
                        %Non-interest-bearing
      liabilities
                        841
                        
                        
                        
                        
                        
                        709Total
    liabilities
                        72,368
                        
                        
                        
                        
                        
                        57,096Stockholders’
      Equity
                        17,346
                        
                        
                        
                        
                        
                        17,654Total liabilities and
      Stockholders’ Equity
                        $89,714
                        
                        
                        
                        
                        
                        $74,750Net
      interest-earning assets
                        $15,440
                        
                        
                        
                        
                        
                        $16,837Net
      interest income; average interest rate spread
                        
                        
                        $    730
                        
                        2.74
                        %
                        
                        
                        
                        $    568
                        
                        2.11
                        %Net
      interest margin (2)
                        
                        
                        
                        
                        3.36
                        %
                        
                        
                        
                        
                        
                        3.10
                        %Average
      interest-earning assets to average
                          interest-bearing
      liabilities
                        
                        
                        
                        
                        121.59
                        %
                        
                        
                        
                        
                        
                        129.86
                        %
  (1)
                      Includes
      non-accrual loans during the respective periods.  Calculated net
      of deferred fees and discounts, loans in process and allowance for loan
      losses.
 (2)
                      Equals
      net interest income divided by average interest-earning
      assets.
 19


The
Company increased its provision for loan losses by $25,000, from $37,000 for the
quarter ended March 31, 2008 to $62,000 for the same period in 2009, based on an
evaluation of the allowance relative to such factors as volume of the loan
portfolio, concentrations of credit risk, prevailing economic conditions, prior
loan loss experience and amount of non-performing loans at March 31,
2009.  Non-performing loans amounted to $580,000, or 0.8% of net loans
receivable at March 31, 2009, consisting of five loans, two of which are 90 days
or more past due and accruing interest and three of which are on non-accrual
status compared to $439,000 of non-performing loans at December 31,
2008.  The non-performing loans at March 31, 2009 include two
one-to-four family owner occupied residential loans, two commercial real estate
loans and one home equity loan and all are generally well-collateralized or
adequately reserved for.  Management does not anticipate any
significant losses on these loans.  During the quarter ended March 31,
2009, two loans were placed on non-accrual status resulting in the reversal of
$11,000 of previously accrued interest income, one loan for $7,000 was placed
back on accrual status, and two loans totaling $125,000 were
paid-off.  Also during the quarter, a multi-family residential loan
for $208,000 was transferred to other real estate owned.  Not included
in non-performing loans are performing troubled debt restructurings which
totaled $1.4 million at March 31, 2009 compared to $921,000 at December 31,
2008.  Non-performing assets amounted to $1.5 million, or 1.65% of
total assets at March 31, 2009.  The allowance for loan losses as a
percent of total loans receivable was 1.01% at March 31, 2009 and 0.98% at
December 31, 2008.  Other real estate owned was $940,000 at March 31,
2009 compared to $732,000 at December 31, 2008.




Non-Interest
Income.Non-interest income increased $9,000, or 81.8%, from
$11,000 for the three months ended March 31, 2008 to $20,000 for the three
months ended March 31, 2009 due to an increase in fees and service
charges.




Non-Interest
Expense.  Non-interest expense increased $79,000, or 20.7%,
from $382,000 for the three months ended March 31, 2008 to $461,000 for the
three months ended March 31, 2009.  Salaries and employee benefits
expense accounted for $65,000 of the change as this expense increased 35.7% from
$182,000 for the three months ended March 31, 2008 to $247,000 for the
comparable period in 2009 due to increased staff, annual salary increases, and
the compensation expense associated with the stock compensation plans. In
addition, professional fees accounted for $25,000 of the change as this expense
increased 36.2% from $69,000 for the three months ended March 31, 2008 to
$94,000 for the three months ended March 31, 2009 due primarily to the increase
in costs associated with being a publicly held company.  Also
contributing to the quarter over quarter increase was a $1,000, or 5.9% increase
in regulatory expense.  These increases were offset by decreases in
directors’ fees and expenses, and other expenses of $3,000 and $9,000,
respectively on a quarter over quarter basis.




Provision for Income
Tax.The provision for income tax increased $27,000 from
$63,000 for the three months ended March 31, 2008 to $90,000 for the three
months ended March 31, 2009 due primarily to the increase in pre-tax
income.  The Company’s effective tax rate, including federal and state
income taxes, was 39.6% and 39.4% for three months ended March 31, 2009 and
2008, respectively.




Liquidity
and Capital Resources




The Company’s primary sources of funds are deposits,
amortization and prepayment of loans and to a lesser extent, loan sales and
other funds provided from operations.  While scheduled principal
repayments 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 March 31, 2009, the Company's
cash and cash equivalents amounted to $2.2 million.  At such date, the
Company also had $3.8 million invested in interest-earning time deposits
maturing in one year or less.


20


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 March 31,
2009, Quaint Oak Bank had outstanding commitments to originate loans of $320,000
and commitments under unused lines of credit of $2.4
million.




At March
31, 2009, certificates of deposit scheduled to mature in less than one year
totaled $40.9 million.  Based on prior experience, management believes
that a significant portion of such deposits will remain with us, although there
can be no assurance that this will be the case.




In addition to cash flow from loan payments and
prepayments and deposits, the Company has significant borrowing capacity
available to fund liquidity needs.  If the Company requires funds
beyond its ability to generate them internally, borrowing agreements exist with
the Federal Home Loan Bank of Pittsburgh, which provide an additional source of
funds.  At March 31, 2009, Quaint Oak Bank had $8.4 million of
advances from the Federal Home Loan Bank of Pittsburgh and had $41.7 million in
borrowing capacity.  We are reviewing our continued utilization of
advances from the Federal Home Loan Bank as a source of funding based on recent
decisions by the Federal Home Loan Bank to suspend the dividend on, and restrict
the repurchase of, Federal Home Loan Bank stock.  The amount of
Federal Home Loan Bank stock that a member institution is required to hold is
directly proportional to the volume of advances taken by that
institution.  Should we decide to utilize sources of funding other
than advances from the Federal Home Loan Bank, we believe that additional
funding is available in the form of advances or repurchase agreements through
various other sources.  The Bank currently has a line of credit
commitment from another bank for borrowings up to $1.5 million.  There
were no borrowings under this line of credit at March 31,
2009.




Our
stockholders’ equity amounted to $17.3 million at March 31, 2009, an increase of
$3,000 from December 31, 2008.This small increase from
December 31, 2008 was the result of net income for the three months ended March
31, 2009 of $137,000, and a decrease in unallocated shares held by the ESOP of
$17,000 and $27,000 of compensation expense related to stock compensation plans,
offset by the purchase of 18,932 shares of the Company’s common stock in the
open-market as part of the Company’s stock repurchase program for an aggregate
purchase price of $145,000, and dividends paid of
$33,000.




Quaint
Oak Bank is required to maintain regulatory capital sufficient to meet tier 1
leverage, tier 1 risk-based and total risk-based capital ratios of at least
4.00%, 4.00% and 8.00%, respectively.  At March 31, 2009, Quaint Oak
Bank exceeded each of its capital requirements with ratios of 14.84%, 19.63% and
20.77%, respectively. As a savings and loan holding company, the Company is not
subject to any regulatory capital requirements.




Off-Balance
Sheet Arrangements




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


21


Commitments.  At
March 31, 2009, we had unfunded commitments under lines of credit of $2.4
million and $320,000 of commitments to originate loans.  We had no
commitments to advance additional amounts pursuant to outstanding lines of
credit or undisbursed construction loans.




Impact
of Inflation and Changing Prices




The consolidated financial statements and related
financial data presented herein have been prepared in accordance with accounting
principles generally accepted in the United States of America which generally
require the measurement of financial position and operating results in terms of
historical dollars, without considering changes in relative purchasing power
over time due to inflation. Unlike most industrial companies, virtually all of
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.




ITEM
3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK




Not
Applicable.




ITEM
4. CONTROLS AND PROCEDURES




Our
management, with the participation of our principal executive officer and
principal financial officer, evaluated the effectiveness of our disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934 (the “Exchange Act”)) as of March 31,
2009.  Based on their evaluation of the Company’s disclosure controls
and procedures, the Company’s principal executive officer and principal
financial officer have concluded that our disclosure controls and procedures are
designed to ensure that information required to be disclosed by the Company in
reports that it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission rules and regulations are operating in an effective
manner.




No change in our internal control over financial
reporting (as defined in Rules 13a-15(f) and 15(d)-15(f) under the Securities
Exchange Act of 1934) occurred during the first fiscal quarter of fiscal 2009
that has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.


22


PART
II


ITEM
1. LEGAL PROCEEDINGS
  The Company is not
involved in any pending legal proceedings other than routine legal proceedings
occurring in the ordinary course of business, which involve amounts in the
aggregate believed by management to be immaterial to the financial condition and
operating results of the Company.
  ITEM
1A. RISK FACTORS
  Not
applicable.
  ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  (a)           Not
applicable.
  (b)           Not
applicable.
  (c)           Purchases
of Equity Securities
  The
Company’s repurchases of its common stock made during the quarter ended March
31, 2009 are set forth in the table below:
  Period
                  
                  Total
      Number of Shares
                    Purchased
                  
                  Average
      Price Paid per Share
                  
                  Total
      Number of Shares Purchased as Part of Publicly Announced Plans or
      Programs
                  
                  Maximum
      Number of Shares that May Yet Be Purchased Under the Plans or Programs
      (1)January
      1, 2009 – January 31, 2009
                  
                  2,000
                  
                  $8.10
                  
                  2,000
                  
                  100,258February
      1, 2008 – February 28, 2009
                  
                  2,100
                  
                  7.80
                  
                  2,100
                  
                  98,158March
      1, 2009 – March 31, 2009
                  
                  14,832
                  
                  7.55
                  
                  14,832
                  
                  83,326Total
                  
                  18,932
                  
                  $7.64
                  
                  18,932
                  
                  83,326
 
 Notes
to this table:
 
 (1)
                On
      June 12, 2008 the Company announced by press release its first stock
      repurchase program to repurchase 138,862 shares, or 10% of its outstanding
      common stock over a two-year period. The program became effective July 5,
      2008.
  ITEM
3. DEFAULTS UPON SENIOR SECURITIES
  Not
applicable.
  ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  Not
applicable.
  23
 ITEM
5. OTHER INFORMATION
  Not
applicable.
  ITEM
6. EXHIBITS
  The following Exhibits are
filed as part of this report:
  No.
              
              Description31.1
              
              Rule
      13a-14(a)/15d-14(a) Certification of Chief Executive
    Officer31.2
              
              Rule
      13a-14(a)/15d-14(a) Certification of Chief Financial
    Officer32.0
              
              Certification
      Pursuant to 18 U.S.C Section
1350


24




SIGNATURES
   In accordance with the
requirements of the Exchange Act, the registrant caused this report to be signed
on its behalf by the undersigned, thereunto duly
authorized.
   Date:  May
      14, 2009
                By:
                /s/Robert
      T. StrongRobert
      T. StrongPresident
      and Chief Executive OfficerDate:  May
      14, 2009
                By:
                /s/Diane
      J. ColyerDiane
      J. ColyerOperations
      Officer(principal
      financial and accounting
officer)