# CARTY, HARDING & HEARN, INC. X-17A-5 (2026-03-03) — Broker-dealer annual report - Company: CARTY, HARDING & HEARN, INC. - Form: X-17A-5 - Filed: 2026-03-03 - Period: 2025-12-31 - Accession: 0000018026-26-000003 - CIK: 18026 - File #: 8-19082 - Type: Broker-dealer - Material weakness: No - Auditor: Greer Walker CPA's & Advisors - Auditor location: Charlotte, NC - Contact: Angela Lynn Ruetten - Phone: 9017678940 - Email: ruetten@cartyco.com - Website: cartyco.com - Signed by: Angela Ruetten (CFO) Original filing: https://www.sec.gov/Archives/edgar/data/18026/000001802626000003/Public.pdf --- {0}------------------------------------------------ Carty, Harding & Hearn, Inc. #### FINANCIAL REPORT December 31, 2025 {1}------------------------------------------------ **UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549** ' **ANNUAL REPORTS FORM X-17A-5 PART** Ill **FACING PAGE** 0MB APPROVAL 0MB Number: 3235-0123 Expires: Nov. 30, 2026 Estimated average burden hours per response: 12 SEC FILE NUMBER 8-19082 **Information Required Pursuant to Rules 17a-5, 17a-12, and 18a-7 under the Securities Exchange Act of 1934** FILING FOR THE PERIOD BEGINNING **Q 1/01/2025** MM/DD/YY ANO ENDING **12/31/2025** MM/DD/VY **A. REGISTRANT IDENTIFICATION** NAME FFIRM : Carty, Harding & Hearn, Inc. TYPE OF REGISTRANT (check all applicable boxes): [!] Broker-dealer D Security-based swap dealer D Major security-based swap participant D Check here if respondent is also an OTC derivatives dealer ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use a P.O. box no.) 6263 Poplar Avenue, Suite 800 ( No. and Street) Memphis TN 38119 (City) (State) (Zip Code) PERSON TO CONTACT WITH REGARD TO THIS FILING Angela Ruetten 901-767-8940 a ruetten@cartyco.com (Name) (Area Code - Telephone Number) (Email Address) **B. ACCOUNTANT IDENTIFICATION** INDEPENDENT PUBLIC ACCOUNTANT whose reports are contained in this filing\* Greer Walker CPAs & Advisors (Name - if individual, state last, first, and middle name) 227 West Trade Street, Suite 11 0 Charlotte NC 28202 {Address) (City) (State) (Zip Code) 06/07/2005 2324 (Date of Registration with PCAOB)(if applicable) (PCAOB Registration Number, if applicable) **FOR OFFICIAL USE ONLY** • Claims for exemption from the requirement that the annual reports be covered by the reports of an independent public accountant must be supported by a statement of facts and circumstances relied on as the basis of the exemption. See 17 CFR 240.17a-S(e)(1)(ii), if applicable. **Persons who are to respond to the collection of information contained in this form are not required to respond unless the form dlsplays a currently valid 0MB control number.** {2}------------------------------------------------ #### **OATH OR AFFIRMATION** | I, Angela Ruetten | | | swear (or affirm) that, to the best of my knowledge and belief, the | | |-------------------------------------------------------------------------------------------------------------------------------------|----|-----------|-----------------------------------------------------------------------------------|-------| | financial report pertaining to the firm of Carty, Harding & Hearn, Inc. | | | | as of | | 12/31 | 2~ | | is true and correct. I further swear (or affirm) that neither the company nor any | | | partner, officer, director, or equivalent person, as the case may be, has any proprietary interest in any account classified solely | | | | | | as that of a customer. | | s;gnatur~ | Q ;[6 | | | | | Title: | C,J==-o | | #### **This filing\*\* contains (check all applicable boxes):** - Iii (a) Statement of financial condition. - **iii (b)** Notes to consolidated statement of financial condition. - □ (c) Statement of income (loss) or, if there is other comprehensive income in the period(s) presented, a statement of comprehensive income (as defined in § 210.1-02 of Regulation **S-X).** - D (d) Statement of cash flows. - □ (e) Statement of changes in stockholders' or partners' or sole proprietor's equity. - □ (f) Statement of changes in liabilities subordinated to claims of creditors. - D {g) Notes to consolidated financial statements. - D (h) Computation of net capital under 17 CFR 240.1Sc3-1 or 17 CFR 240.18a-l, as applicable. - □ (1) Computation of tangible net worth under 17 CFR 240.18a-2. - D (j) Computation for determination of customer reserve requirements pursuant to Exhibit A to 17 CFR 240.1Sc3-3. - D (k) Computation for determination of security-based swap reserve requirements pursuant to Exhibit B to 17 CFR 240.15c3-3 or Exhibit A to 17 CFR 240.18a-4, as applicable. - □ (I) Computation for Determination of **PAB** Requirements under Exhibit A to§ 240.1Sc3-3. - D (m) Information relating to possession or control requirements for customers under 17 CFR 240.1Sc3-3. - D (n) Information relating to possession or control requirements for security-based swap customers under 17 CFR 240.15c3-3(p)(2) or 17 CFR 240.18a-4, as applicable. - D {o) Reconciliations, including appropriate explanations, of the FOCUS Report with computation of net capital or tangible net worth under 17 CFR 240.1Sc3-l, 17 CFR 240.lBa-1, or 17 CFR 240.18a-2, as applicable, and the reserve requirements under 17 CFR 240.1Sc3-3 or 17 CFR 240.lBa-4, as applicable, if material differences exist, or a statement that no material differences exist. - □ (p) Summary of financial data for subsidlaries not consolidated in the statement of financial condition. - **iii** (q) Oath or affirmation in accordance with 17 CFR 240.17a-5, 17 CFR 240.17a-12, or 17 CFR 240.18a-7, as applicable. - □ (r) Compliance report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - D (s) Exemption report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - ~ (t) Independent public accountant's report based on an examination of the statement of financial condition. - D (u) Independent public accountant's report based on an examination of the financial report or financial statements under 17 CFR 240.17a-5, 17 CFR240.18a-7, or 17 CFR 240.17a-12, as applicable. - D (v) Independent public accountant's report based on an examination of certain statements in the compliance report under 17 CFR 240.17a-5 or 17 CFR 240.lBa-7, as applicable. - D (w) Independent public accountant's report based on a review of the exemption report under 17 CFR 240.17a-S or 17 CFR 240.lSa-7, as applicable. - □ (x) Supplemental reports on applying agreed-upon procedures, in accordance with 17 CFR 240.15c3-le or 17 CFR 240.17a-12, as applicable. - D (y) Report describing any material inadequacies found to exist or found to have existed since the date of the previous audit, or a statement that no material inadequacies exist, under 17 CFR 240.17a-12(k). □ (z) other: - -------- - ----------------------------- - - \*"To request confidential treatment of certain portions of this filing, see 17 CFR 240.17a-5(e)(3} or 17 CFR 240.18a-7(d)(2), as applicable. {3}------------------------------------------------ #### **CONTENTS** | Financial Statements | | |----------------------------------|---| | Statement of Financial Condition | 3 | | Notes to Financial Statements | 4 | {4}------------------------------------------------ # **913,329 | |------------------------------------------|---------------| | Receivables: | | | Broker-dealers and clearing | | | organizations | 100,000 | | Officers, directors and employees, net | 264,010 | | Securities owned, at fair value | 16,477,169 | | Prepaid state taxes | 72,397 | | Operating lease right-of-use assets, net | 1,439,441 | | Property and equipment, net | 173,089 | | Other assets | 598,961 | | TOTAL ASSETS | \$20,038,396 | #### **LIABILITIES AND STOCKHOLDER'S EQUITY** | Accounts payable, accrued expenses | | |------------------------------------------------------------|--------------| | and other liabilities | \$ 1,412,833 | | Due to clearing organization | 515,208 | | Payable to parent company | 560,212 | | Operating lease liabilities | 1,527,047 | | Total liabilities | 4,015,300 | | DEFERRED INCOME TAXES | 21,885 | | STOCKHOLDER'S EQUITY | | | Common stock, no par value; authorized 25,000 | | | shares; issued 10,500 shares; outstanding 3,833 1/3 shares | 2,208,790 | | Retained earnings | 13,873,439 | | | 16,082,229 | | Less cost of 6,666 2/3 shares of treasury stock | 81,018 | | | 16,001,211 | | TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY | \$20,038,396 | The accompanying notes are an integral part of these financial statements. {6}------------------------------------------------ #### **NOTE A** - **OPERATIONS AND ORGANIZATION** Carty, Harding & Heam, Inc. ("the Company") is a securities broker-dealer operating under provisions of the Securities Exchange Act of 1934 and is a member of the Financial Industry Regulatory Authority ("FINRA"). The Company is a wholly-owned subsidiary of Carty Financial Corporation ("Parent"). The Company operates primarily as a principal in transactions for the purchase and sale of various types of debt securities which include obligations of the United States Government, federal government agencies, various state and local governments, and corporate debt. The Company also acts as agent for customers in acquiring certificates of deposits, equity securities, mutual funds and private placement of mortgage loans. The Company's securities transactions are made primarily with individuals, financial institutions, credit unions, private organizations and other broker-dealers. The Company operates under the provisions of Paragraph (k)(2)(ii) of Rule 15c3-3 of the Securities and Exchange Commission ("SEC") and, accordingly, is exempt from the remaining provisions of that Rule. Essentially, the requirements of Paragraph (k)(2)(ii) provide that the Company clear all transactions on behalf of customers on a fully disclosed basis with a clearing broker-dealer and promptly transmit all customer funds and securities to the clearing brokerdealer. The clearing broker-dealer carries all of the accounts of the customers and maintains and preserves all related books and records as are customarily kept by a clearing broker-dealer. The Company has contracted with Pershing, LLC to act in the capacity of its clearing broker and all customer funds and securities are safe kept with that institution in accordance with the SEC regulations. The customer's funds and securities are protected to limits provided by the Securities Investor Protection Corporation ("SIPC") with additional protection provided by a third party to cover the entire account net equity up to an aggregate of \$100 million. #### **NOTE B** - **SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES** #### **Basis of Accounting** The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States ("GAAP") as determined by the Financial Accounting Standards Board ("F ASB") Accounting Standards Codification ("ASC"). #### **Adoption of ASU 2023-09, Income Taxes (Topic 740)** Effective January **1,** 2025, the Company adopted Accounting Standards Update ("ASU") 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, issued by the Financial Accounting Standards Board (FASB). The standard enhances income tax disclosures by requiring greater disaggregation of the Company's effective tax rate reconciliation and expanded disclosure of income taxes paid, including disclosure by federal, state, and foreign jurisdictions meeting a quantitative threshold. {7}------------------------------------------------ #### **NOTE B** - **SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES** - **CONTINUED** #### **Segment Reporting** The Company is engaged in a single line of business as a securities broker dealer, which is comprised of one class of service. The Company has identified its chief executive officer as the chief operating decision maker ("CODM"), who uses net income to evaluate the results of the business to manage the Company. Additionally, the CODM uses excess net capital, which is not a measure of profit and loss, to make operational decisions while maintaining capital adequacy, such as whether to reinvest profits or pay dividends. The Company's operations constitute a single operating segment and therefore, a single reportable segment, because the CODM manages the business activities using information from the Company as a whole. The accounting policies used to measure the profit and loss of the segment are the same as those described in the summary of significant accounting policies. #### **Recording Security Transactions** Purchases and sales of securities and related commission revenues and expenses are recorded on a settlement date basis, generally the second business day following the trade date. If materially different, transactions are adjusted to a trade date basis. Interest income on securities owned is included within interest income in the statement of operations. #### **Collateral** The Company continues to rep011 assets it has pledged as collateral in secured borrowing and other arrangements when the secured party cannot sell or pledge the assets. #### **Securities Owned and Securities Sold, But Not Yet Purchased** Marketable securities, consisting of stocks, corporate bonds, state, municipal and United States and agencies obligations, and securities sold but not yet purchased, are trading securities and valued at market value. Securities not readily marketable are stated at their estimated value. Rules and regulations of the SEC require valuation of broker•dealer owned securities to be valued at market value. Unrealized gains and losses have been included in trading securities income. {8}------------------------------------------------ # **NOTE B** - **SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES** - **CONTINUED** #### **Receivables from Officers, Directors and Employees** Receivables from officers, directors and employees primarily represent advances for license fees and commissions made in anticipation of continued employment with the Company. These receivables are reduced by an allowance for credit losses (\$50,000 as of December 31, 2025), which reflects management's estimate of the risk of loss due to lack of repayment, primarily in cases when the employee has left the Company before the advance has been fully repaid. The Company recognizes the amount of change in current expected credit losses as an allowance gain or loss in expenses in the accompanying statement of operations. For the year ended December 31, 2025, the Company recognized allowance losses of \$24,000. Accounts are written off against the allowance when the Company has no reasonable expectation of recovering the receivable, either in its entirety or a portion thereof. Management considers collection activity after the balance sheet date through the date the financial statements are to be issued when estimating expected credit losses. Management then estimates the allowance for credit losses by applying historical credit loss rates to receivable aging categories. Management considers historical loss info1mation to be a reasonable base for its estimate as the composition of these receivables and the risk characteristics have not changed significantly over time. In addition, accounts are pooled by aging category as the change in risk characteristics is similar for each receivable category. Management has determined that the current economic conditions are consistent with the economic conditions included in the historical information. #### **Property and Equipment** Property and equipment are stated at cost. Depreciation expense is determined by the straight-line method over the estimated useful lives of the assets, which range from three to ten years. Leasehold improvements are amortized over the lesser of the economic useful life or the term of the lease. #### **Use of Estimates** The preparation of financial statements in conformity with GAAP 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 revenues and expenses during the reporting period. Actual results could differ from those estimates. {9}------------------------------------------------ #### **NOTE B** - **SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES** - **CONTINUED** #### **Advertising Costs** The Company expenses all advertising costs, including direct response advertising costs, as they are incurred. Total advertising costs for the year ended December 31, 2025 were \$153,356. #### **Income Taxes** The Company is included in the consolidated federal income tax return filed by its Parent. Federal income taxes are calculated as if the Company filed a separate return, and the amount of current tax expense or benefit calculated is either remitted to or received from the Parent. The Company files its own state income tax returns and the amount of current tax expense or benefit calculated is either remitted to or received from the state taxing authority. The Company provides for income taxes and the related accounts under the asset and liability method. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates expected to be in effect during the year in which the basis differences reverse. Valuation allowances are established when mariagement determines it is more likely than not that some portion, or all, of the deferred tax assets will not be realized. #### **Allocated Expenses from Parent Company** The Parent incurs the costs of salaries, commissions and related expenses and allocates such costs to the operations of the Company. The Parent charges the Company a management fee to cover salary processing costs. At December 31, 2025, the Company owed the Parent \$560,212. #### **Revenue Recognition** The Company's revenue is comprised primarily of principal transactions for the purchase and sale of various types of debt securities which include obligations of the United States Government, federal government agencies, various state and local governments, and corporate debt. The Company also acts as agent for customers in acquiring certificates of deposits, equity securities, mutual funds and private placements of mortgage loans. As noted above, trading securities and related commission revenues are primarily recognized on a settlement date basis, which is typically not significantly different from the trade date. The Company believes that the performance obligation is satisfied on the settlement date because that is when the underlying financial instrument or purchaser is identified, the pricing is agreed upon and the risks and rewards of ownership have been transferred to/from the customer. {10}------------------------------------------------ # **NOTE B** - **SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES** - **CONTINUED** #### **Leases** The Company is a lessee in a noncancelable operating lease for office space. The Company determines if an arrangement is a lease, or contains a lease, at inception of a contract and when the terms of an existing contract are changed. The Company made an accounting policy election available under GAAP to not recognize ROU assets and lease liabilities for leases with a term of 12 months or less. For all other leases, the Company recognizes a lease liability and a right-of-use ("ROU") asset at the commencement date of the lease. The lease liability is initially and subsequently recognized based on the present value of its future lease payments. Variable payments are included in the future lease payments when those variable payments depend on an index or a rate. The discount rate is the implicit rate if it is readily determinable or otherwise the Company uses its incremental borrowing rate. The implicit rates of our leases are not readily determinable, and accordingly, we use our incremental borrowing rate based on the information available at the commencement date for all leases. The Company's incremental borrowing rate for a lease is the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms and in a similar economic environment. The ROU asset is subsequently measured throughout the lease term at the amount of the remeasured lease liability (i.e., present value of the remaining lease payments), plus unamortized initial direct costs, plus unamortized initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the unamortized balance of lease incentives received, and any impailment recognized. Lease cost for lease payment is recognized on a straight-line basis over the lease term. #### **Events Occurring After Report Date** The Company has evaluated events and transactions for possible recognition or disclosure in the financial statements. There are no subsequent events requiring disclosure. #### **NOTE C** - **FAIR VALUE MEASUREMENT** F ASB ASC 820 defines fair value, establishes a framework for measuring fair value, and establishes a fair value hierarchy which prioritizes the inputs to valuation techniques. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market. Valuation techniques that are consistent with the market, income or cost approach, as specified by F ASB ASC 820, are used to measure fair value. {11}------------------------------------------------ # **NOTE C** - **FAIR VALUE MEASUREMENT** - **CONTINUED** The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels: - Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities the Company has the ability to access. - Level 2 inputs are inputs (other than quoted prices included within Level 1) that are observable for the asset or liability, either directly or indirectly. - Level 3 inputs are unobservable inputs for the asset or liability and rely on management's own assumptions about the assumptions that market participants would use in pricing the asset or liability. The unobservable inputs should be developed based on the best information available in the circumstances and may include the Company's own data. Following is a description of the valuation methodologies used for the assets measured at fair value. There have been no changes in the methodologies used at December 31, 2025. *U S. government securities:* Valued at the closing price reported in the active market in which the individual securities are traded, except for Small Business Administration ("SBA") loans, for which amounts are determined based on the best information gathered from the secondary market or other investors of SBA loans. *Municipal securities:* Certain municipal securities are valued at the closing price reported in the active market in which the security is traded. Other municipal securities are valued based on yields currently available on comparable securities of issuers with similar credit ratings, maturity dates, and other factors related to the security. *Corporate bonds:* Certain corporate bonds are valued at the closing price reported in the active market in which the bond is traded. Other corporate bonds are valued based on yields currently available on comparable securities of issuers with similar credit ratings. *Common stocks:* Certain common stocks are valued at the closing price reported in the active market in which the individual securities are traded. Investments in certain restricted common stocks are valued at the quoted market price of the issuer's unrestricted common stock less an appropriate discount. If a quoted market price for unrestricted common stock of the issuer is not available, restricted common stocks are valued at a multiple of current earnings less an appropriate discount. The multiple chosen is consistent with multiples of similar companies based on current market prices. {12}------------------------------------------------ #### **NOTE C - FAIR VALUE MEASUREMENT - CONTINUED** The preceding methods described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthe1more, although the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. The following table presents the Company's fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of December 31, 2025. | | | Fair Value Measurements on a Recurring Basis
As of December 31, 2025 | | | | |----------------------------|--------------|-------------------------------------------------------------------------|--------------|--------------|--| | | Level 1 | Level 2 | Level 3 | Total | | | Securities owned: | | | | | | | U.S. government securities | \$
14,988 | -
\$ | \$1,671,572 | \$ 1,686,560 | | | Municipal securities | 14,611,625 | | | 14,611,625 | | | Corporate bonds | 178,753 | | | 178,753 | | | Common stocks | 231 | | | 231 | | | Total Securities Owned | \$14,805,521 | ==-
~\$ | \$.L.671,572 | U6,477,162 | | Current year changes in Level 3 securities are comprised of the purchase of loans in the amount of \$1,008,257. #### **NOTE D - RECEIVABLE FROM AND PAYABLE TO BROKER-DEALERS AND CLEARING ORGANIZATIONS** Amounts receivable from and payable to broker-dealers and clearing organizations at December 31, 2025, consist of the following: | | Receivable | J>ayable | |------------------------------------------|---------------|----------------| | Deposits
Due to clearing organization | \$
100,000 | \$
515,208 | | | \$
100,000 | _\$__5_15 ,208 | {13}------------------------------------------------ #### **NOTED - RECEIVABLE FROM AND PAYABLE TO BROKER-DEALERS AND CLEARING ORGANIZATIONS - CONTINUED** The Company clears certain of its prop1ietary and customer transactions through another brokerdealer on a fully disclosed basis. As part of the Company's clearing agreement with Pershing, LLC, a minimum deposit of \$100,000 is always to be maintained. The minimum deposit balance is subject to withdrawal restrictions such that the Company would be prohibited from doing business with Pershing, LLC if the minimum cash balance on deposit is not maintained. The Company's deposit would be returned if it terminated its agreement with Pershing, LLC. The amount payable to the clearing broker relates to unsettled transactions and is collateralized by securities owned by the Company. #### **NOTE E - PROPERTY AND EQUIPMENT** Property and equipment as of December 31, 2025 was comprised of the following: | Furniture and fixtures | \$ 848,117 | |------------------------------------------------|------------| | Office equipment | 463,588 | | Leasehold improvements | 143,373 | | Total | 1,455,078 | | Less accumulated amortization and depreciation | 1.281.989 | | Property and equipment, net | \$ 173,089 | #### **NOTE F-ADOPTION OF NEW ACCOUNTING STANDARD: ASU 2023-09, INCOME TAXES (TOPIC 740): IMPROVEMENTS TO INCOME TAX DISCLOSURES** In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which enhances transparency and decision-usefulness of income tax disclosures, primarily focusing on effective tax rate reconciliation and income taxes paid. The provision for income taxes is comprised of: | | Current | Deferred | Total | |---------------------------------------|---------------------|----------------------|----------------------| | Federal
State tmces -
Tennessee | \$169,587
40,786 | \$ (5,878)
38,087 | \$ 163,709
78,873 | | Provisions for income tax expense | \$210,373 | \$ 32,209 | \$242,582 | {14}------------------------------------------------ #### **NOTE F** - **INCOME TAX MATTERS** - **CONTINUED** The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to income before provision for income taxes. | The sources and tax effects of the differences are as follows: | | |----------------------------------------------------------------|-------------| | Income tax provision at the federal statutory rate of21 % | \$ 253,431 | | State of Tennessee tax rate of 6.5%, net of federal benefits | 58,832 | | Nondeductible expenses | 9,303 | | Nontaxable income on tax-exempt bonds | (73,920) | | Other adjustments, net | (5.064) | | | \$. 242.582 | The Company's income tax provision was computed based on the federal statutory rate and the average state statutory rates, net of the related federal benefit. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities are as follows: | Deferred tax assets (liabilities): | | |-----------------------------------------------------|---------------| | Reserves for employee loans and commission accruals | \$
19,593 | | Fixed assets and leases | (41,478) | | | .\$_ (21,885) | #### **NOTE G** - **NET CAPITAL REQUIREMENTS** The Company is subject to the SEC Uniform Net Capital Rule (Rule 15c3-1), which requires the maintenance of minimum net capital and requires that the ratio of aggregate indebtedness to net capital, both as defined under the applicable rules, shall not exceed 15 to 1. At December 31, 2025, the Company had net capital of \$13,781,536 which was \$13,531,536 in excess of its required net capital of \$250,000. The Company's ratio of aggregate indebtedness to net capital was .19 to 1. #### **NOTE H** - **401(k) PROFIT SHARING PLAN** The Company's employees are included in the Company's qualified 401(k) profit sharing plan. The Company's contribution to the plan is determined by the Board of Directors and is discretionary. The Company contributed \$84,337 to the profit sharing plan for the year ended December 31, 2025. {15}------------------------------------------------ #### **NOTE** I - **LEASES** The Company is obligated for monthly lease payments on its Memphis office until September 30, 2029 and its Little Rock office until April 30, 2028. The lease requires annual rental payments as follows: | Year Ending | | |-----------------------------|---------------| | December 31: | Amount | | 2026 | \$
485,890 | | 2027 | 494,491 | | 2028 | 452,078 | | 2029 | 325,373 | | Total | 1,757,832 | | Less present value discount | 230,785 | | Operating lease liabilities | \$1,527.047 | The components of lease cost for the year ended December 31, 2025 are as follows: | Operating lease cost | \$491,917 | |-----------------------|-----------| | Short term lease cost | 87 474 | | Total lease cost | \$579,391 | Amounts reported in the statement of financial condition as of December 31, 2025 were as follows: | Operating lease ROU assets
Operating lease liabilities | \$1,439,441
\$1,527,047 | |-----------------------------------------------------------|----------------------------| | Weighted average remaining lease term:
Operating lease | 3.67 years | | Weighted average discount rate:
Operating lease | 7.75% | {16}------------------------------------------------ #### **NOTE J** - **COMMITMENTS AND CONTINGENCIES** The Company, in the normal course of its business, has matters involving regulations and procedures reviewed by FINRA, the SEC and other regulatory bodies. As of December 31, 2025, no items of material significance were outstanding as a result of such reviews. #### **NOTE K** - **GUARANTEES** F ASB ASC 460, *Guarantees,* requires the Company to disclose information about its obligations under certain guarantee arrangements. F ASB ASC 460 defines guarantees as contracts and indemnification agreements that contingently require a guarantor to make payments to the guaranteed party based on changes in an underlying (such as an interest or foreign exchange rate, security or commodity price, an index or the occurrence or nonoccurrence of a specified event) related to an asset, liability or equity security of a guaranteed party. This guidance also defines guarantees as contracts that contingently require the guarantor to make payments to the guaranteed party based on another entity's failure to perform under an agreement as well as indirect guarantees of the indebtedness of others. #### *Indemnifications* In the normal course of its business, the Company indemnifies and guarantees certain service providers, such as clearing and custody agents, trustees and administrators, against specified potential losses in connection with their acting as an agent of, or providing services to, the Company or its affiliates. The Company also indemnifies some clients against potential losses incurred in the event specified third-party service providers, including subcustodians and third-party brokers, improperly executed transactions. The maximum potential amount of future payments that the Company could be required to make under these indemnifications cannot be estimated. However, the Company believes that it is unlikely it will have to make material payments under these arrangements and has not recorded any contingent liability in the financial statements for these indemnifications. {17}------------------------------------------------ # **NOTE K- GUARANTEES - CONTINUED** The Company provides representations and warranties to counterparties in connection with a variety of commercial transactions and occasionally indemnifies them against potential losses caused by the breach of those representations and warranties. The Company may also provide standard indemnifications to some counterparties to protect them in the event additional taxes are owed or payments are withheld, due either to a change in or adverse application of certain tax laws. These indemnifications generally are standard contractual terms and are entered into in **the** normal course of business. The maximum potential amount of future payments that the Company could be required to make under these indemnifications cannot be estimated. However, the Company believes that it is unlikely it will have to make material payments under these arrangements and has not recorded any contingent liability in the financial statements for these indemnifications. # **NOTE L - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISKS AND CONCENTRATION OF CREDIT RISK** In the normal course of business, the Company may be exposed to risks in the execution of securities transactions. These transactions involve elements of risk as to credit extended, market fluctuations, and interest rate changes. The Company's securities transactions clear primarily on a delivery versus payment basis. In transactions with repurchase agreements, margin may be required if market conditions are such as to indicate excessive elements of risk in these transactions. The execution of substantially all purchases and sales of securities requires the performance of another party to fulfill the transactions. In the event that a counter-party to the transaction fails to satisfy its obligation, the Company may be required to purchase or sell the security at the prevailing market price, which may have an adverse effect. The nature of the securities industry is such that large cash balances are maintained in various financial institutions. These balances may exceed the limits of coverage guaranteed by the Federal Deposit Insurance Corporation. The Company, as a securities broker-dealer, is engaged in various securities trading activities with a variety of customers including individuals, financial institutions, credit unions, insurance companies, pension plans, and other broker-dealers. The Company's exposure to credit risk associated with the non-performance of these counter-parties could be impacted by changing market conditions which would impair the counter-parties ability to satisfy their obligations to the Company. {18}------------------------------------------------ # **NOTE M- RELATED PARTY TRANSACTIONS** Carty, Harding & Hearn, Inc. is a wholly-owned subsidiary of Carty Financial Corporation. During the year, Cai1y Financial Corporation allocated \$11,244,313 in direct wage costs and payroll taxes to the Company. #### **NOTE N** - **ANNUAL REPORT OF FORM X-17 A-5** The annual report to the Securities and Exchange Commission on Form X-17 A-5 is available for examination and copying at the Company's office and at the regional office of the Securities and Exchange Commission. # **NOTE 0- COLLATERAL** Amounts that the Company has pledged as collateral for, which are not reclassified and reported separately, at December 31, 2025, consisted of the following: | Financial Statement | Carrying | |-----------------------------------|--------------| | Classification | Amount | | Securities owned
at fair value | \$16,477,169 | Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.