Annual report pursuant to Section 13 and 15(d)

Fair Value Measurement

Fair Value Measurement

12 Months Ended

Dec. 31, 2023

3. Fair Value Measurement

The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair market value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

The following table sets forth by Level, within the fair value hierarchy, the fair value of the Company’s assets as of December 31, 2023:


	Level 1		Level 2			Level 3	Total
Stocks and ETF’s	$	—	$	1,755,219	$	—	$	1,755,219
Mutual funds		16,236,445		—		—		16,236,445
Debt securities		18,945,087		839,281		—		19,784,368
Total investment securities	$	35,181,532	$	2,594,500	$	—	$	37,776,032

The following table sets forth by Level, within the fair value hierarchy, the fair value of the Company’s assets as of December 31, 2022:


	Level 1		Level 2		Level 3		Total
Stocks and ETF’s	$	3,282,659	$	1,446,065	$	—	$	4,728,724
Mutual funds		14,850,839		—		—		14,850,839
Debt securities		3,880,045		1,116,854		—		4,996,899
Total investment securities	$	22,013,543	$	2,562,919	$	—	$	24,576,462

Following is a description of the methodologies used for assets measured at fair value:

Stocks and ETFs (Level 1 and 2): Valued at the closing price reported in the active market in which the individual securities are traded.

Mutual funds (Level 1 and 2): Valued at the daily closing price reported by the fund. Mutual funds held by the Company are open-end mutual funds that are registered with the U.S. Securities and Exchange Commission. These funds are required to publish their daily net asset values and to transact at that price. The mutual funds held by the Company are deemed to be actively traded.

Debt securities: Valued at the closing price reported in the active market in which the individual securities are traded.

Impact of Fair Value of AFS Securities on OCI

The carrying value of the Company’s financial instruments approximates fair value generally due to the relative short-term nature of such instruments. Our other financial assets and financial liabilities have fair value that approximate their carrying value.

Pursuant to ASC 326-30-50-4 and 50-5, the Company is required to disclose investment securities that have been in a continuous unrealized loss position for 12 months or more as of the balance sheet date. As of December 31, 2023 and 2022, the Company had continuous unrealized losses over 12 months in Available-For-Sale debt securities (AFS’s) of $808,561 and $530,987, respectively. The Company reviewed several factors to assess the credit quality of the debt instruments including, but not limited to, current cash position, operating cash flow, corporate earnings, and the impending maturity date of said securities, as of the most recently filed financial statements. As such, during the year ended December 31, 2023, the Company has recorded an allowance for credit losses regarding AFS’s debt securities totaling $808,561, which is included in net income on the Company’s consolidated statements of comprehensive income. The remaining available-for-sale debt securities with a fair market value of $35.2 million had an unrealized gain of $315,614 at December 31, 2023.

The following table presents the impact of the Company’s Available-For-Sale (AFS) securities – debt securities on its Other Comprehensive Income (OCI) for the years ended December 31, 2023 and 2022:


	Year Ended
	December 31,
	2023		2022
OCI from AFS securities – debt securities:
Unrealized (losses) on AFS-debt securities at beginning of period	$	(561,490)	$	(476,016)
Reversal of losses from unrealized to realized		—		310,000
Reclassification of losses from unrealized to provision for credit losses		808,561		—
Unrealized (losses) on securities available-for-sale – debt securities		68,543		(395,474)
Unrealized gain (loss) on investment securities, net		68,543		(85,474)
Balance at end of period	$	315,614	$	(561,490)

As of December 31, 2023 and 2022, the investment securities cost basis were approximately $40.5 million and $40.0 million, respectively.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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