# SAMCO CAPITAL MARKETS, INC. X-17A-5 (2022-03-18) — Broker-dealer annual report - Company: SAMCO CAPITAL MARKETS, INC. - Form: X-17A-5 - Filed: 2022-03-18 - Period: 2021-12-31 - Accession: 0001333702-22-000005 - CIK: 1333702 - File #: 8-67023 - Type: Broker-dealer - Material weakness: No - Auditor: Crowe, LLP - Auditor location: New York, NY - Contact: Olga Maldonado - Phone: 512-637-3811 - Signed by: Joseph R. Mannes (President) Original filing: https://www.sec.gov/Archives/edgar/data/1333702/000133370222000005/2021arpublic.pdf --- {0}------------------------------------------------ | OMB APPROVAL | |---------------------------| | OMB Number: 3235-0123 | | Expires: Oct. 31, 2023 | | Estimated average burden | | hours per response:
12 | | SEC FILE NUMBER | | |-----------------|--| | 07002 | | {1}------------------------------------------------ | State of Tublic, State of Texas
Comm. Expires 08-10-2024
Notary ID 132516062 | | as that of a Frassell BABELLA PRENDERGAST | |------------------------------------------------------------------------------------|--|-------------------------------------------| | | | | | | | | | | Signature: Omnaha K Homala | |--------|----------------------------| | Title: | President | - - - - - - - - - - - - - - - - - - - - - - - - - - - {2}------------------------------------------------ STATEMENT OF FINANCIAL CONDITION AND REPORT of INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM DECEMBER 31, 2021 {3}------------------------------------------------ ## TABLE OF CONTENTS | | | | Report of Independent Registered Public Accounting Firm | | |--|--|--|---------------------------------------------------------|--| | | | | | | #### Financial Statements | Statement of Financial Condition | 2 | |----------------------------------|------| | Notes to Financial Statements | 3-11 | 1 {4}------------------------------------------------ ![](_page_4_Picture_0.jpeg) ## REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Stockholder and Board of Directors SAMCO Capital Markets, Inc. Dallas, Texas ### **Opinion on the Financial Statement** We have audited the accompanying statement of financial condition of SAMCO Capital Markets, Inc. (the "Company") as of December 31, 2021, and the related notes (collectively referred to as the "financial statement"). In our opinion, the financial statement presents fairly, in all material respects, the financial position of the Company as of December 31, 2021, in conformity with accounting principles generally accepted in the United States of America. #### **Basis for Opinion** This financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statement, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statement. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement. We believe that our audit of the financial statement provides a reasonable basis for our opinion. Crowe LLP We have served as the Company's auditor since 2021. New York, New York March 18, 2022 {5}------------------------------------------------ ## STATEMENT OF FINANCIAL CONDITION #### December 31, 2021 | ASSETS | | |---------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------| | Cash | \$
313,337 | | Receivables from clearing broker, including
clearing deposit of \$105,600 | 21,461,114 | | Securities owned, at fair value | 38,682,886 | | Property and equipment, net | 58,229 | | Right-of-use assets | 1,089,343 | | Other assets | 2,722,262 | | | 64,327,171
\$ | | LIABILITIES AND STOCKHOLDER'S EQUITY | | | Liabilities
Accounts payable and accrued expenses
Lease liabilities
Securities sold, not yet purchsed, at fair value
Due to clearing broker | \$
2,756,790
1,094,853
4,971,052
33,456,983 | | Total liabilities | 42,279,678 | | Commitments and contingencies | - | | Stockholder's equity
Common stock, \$.01 par value, 1,000 shares | | | authorized, issued, and outstanding | 10 | | Additional paid-in capital | 8,437,357 | | Retained earnings | 13,610,126 | | Total stockholder's equity | 22,047,493 | | | 64,327,171
\$ | {6}------------------------------------------------ ## NOTES TO FINANCIAL STATEMENTS ## December 31, 2021 ## 1. Nature of business and summary of significant accounting policies ### Nature of Business SAMCO Capital Markets, Inc. (the "Company") is a corporation organized under the laws of the state of Texas on May 9, 2005. The Company's operations consist primarily of engaging in principal and agency transactions, municipal underwriting, financial advisory, and providing investment banking services. The Company is a registered broker-dealer with the Securities and Exchange Commission ("SEC") and is a member of the Financial Industry Regulatory Authority ("FINRA"). The Company introduces its customers on a fully-disclosed basis and clears all transactions through Pershing, LLC ("Pershing"). Accordingly, the Company operates under the exemptive provisions of the SEC Rule 15c3-3(k) (2) (ii) and the "non-covered firm" provision under Footnote 74 of SEC Release No. 34-70073. ### Basis of Presentation The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"). ### Debt Securities Debt securities held by the Company generally are classified as trading, which are securities bought and held principally for the purposes of selling in the near term and, therefore, are held only for a short period of time. Trading securities are recorded at fair value with changes in fair value recorded in earnings. ### Valuation of Investments in Securities and Securities at Fair Value - Definition and Hierarchy In accordance with GAAP, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the "exit price") in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various valuation approaches. In accordance with GAAP, a fair value hierarchy for inputs is used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs reflect the Company's assumptions about the inputs market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The fair value hierarchy is categorized into three levels based on the inputs as follows: Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not applied to Level 1 securities. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment. Level 2 - Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly. Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement. {7}------------------------------------------------ ## NOTES TO FINANCIAL STATEMENTS ## December 31, 2021 ## 1. Nature of business and summary of significant accounting policies (continued) ## Valuation of Investments in Securities and Securities at Fair Value - Definition and Hierarchy (continued) The availability of valuation techniques and observable inputs can vary from security to security and is affected by a wide variety of factors including, the type of security, whether the security is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Those estimated values do not necessarily represent the amounts that may be ultimately realized due to the occurrence of future circumstances that cannot be reasonably determined. Because of the inherent uncertainty of valuation, those estimated values may be materially higher or lower than the values that would have been used had a ready market for the securities existed. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for securities categorized in Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement in its entirety falls, is determined based on the lowest level input that is significant to the fair value measurement. Fair value is a market-based measure considered from the perspective of a market participant rather than an entityspecific measure. Therefore, even when market assumptions are not readily available, the Company's own assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date. The Company uses prices and inputs that are current as of the measurement date, including periods of market dislocation. In periods of market dislocation, the observability of prices and inputs may be reduced for many securities. This condition could cause a security to be reclassified to a lower level within the fair value hierarchy. ### Fair Value - Valuation Techniques and Inputs ### Investments in Securities and Securities Sold, Not Yet Purchased The Company values securities owned and securities sold short that are freely tradable and are listed on a national securities exchange or reported on the NASDAQ national market at their last sales price as of the last business day of the year. Many cash and over-the-counter ("OTC") contracts have bid and ask prices that can be observed in the marketplace. Bid prices reflect the highest price that the marketplace participants are willing to pay for an asset. Ask prices represent the lowest price that the marketplace participants are willing to accept for an asset. The Company's policy for securities traded in the OTC markets and listed securities for which no sale was reported on that date are valued at their last reported "bid" price if held long, and last reported "ask" price if sold short. ### Government Bonds The fair value of government bonds is generally based on quoted price quotations. Valuation adjustments are not applied. Government bonds are generally categorized in Level 1 of the fair value hierarchy. ### State and Municipal Obligations The fair value of municipal bonds is estimated using trades, bid price or spread, two-sided markets, quotes, benchmark curves, market data feeds such as from the municipal securities rulemaking board, new issues, financial statements and trustee reports and is obtained from observed transactions or independent third parties such as vendor or clearing brokers. Municipal bonds are generally categorized in Level 2 of the fair value hierarchy. {8}------------------------------------------------ ## NOTES TO FINANCIAL STATEMENTS ## December 31, 2021 ## 1. Nature of business and summary of significant accounting policies (continued) Fair Value - Valuation Techniques and Inputs (continued) ## Corporate Bonds The fair value of corporate bonds is estimated on the basis of quotes provided by third-party pricing vendors and utilizes valuation inputs from actively traded securities, such as bid prices, bid spreads to Treasury securities, Treasury curves and same or comparable issuer curves and spreads. Corporate bonds are generally categorized in Level 2 of the fair value hierarchy. ## Current Expected Credit Losses (CECL) The Company accounts for estimated credit losses on financial assets measured at an amortized cost basis and certain off-balance sheet credit exposures in accordance with FASB ASC 326-20, Financial Instruments – Credit Losses . FASB ASC 326-20 requires the Company to estimate expected credit losses over the life of its financial assets and certain off-balance sheet exposures as of the reporting date based on relevant information about past events, current conditions, and reasonable and supportable forecasts. The Company records the estimate of expected credit losses as an allowance for credit losses. For financial assets measured at an amortized cost basis the allowance for credit losses is reported as a valuation account on the balance sheet that adjusts the asset's amortized cost basis. As of December 31, 2021 there was no allowance for credit losses reported. Financial assets measured at amortized cost basis that are not eligible for the collateral maintenance practical expedient. For financial assets measured at amortized cost basis that are not eligible for the collateral maintenance practical expedient (and any unsecured amounts for instruments applying the practical expedient), the Company estimates expected credit losses over the life of the financial assets as of the reporting date based on relevant information about past events, current conditions, and reasonable and supportable forecasts. Certain off-balance sheet credit exposures. The Company estimates credit losses on certain off-balance sheet credit exposures over the contractual period of a present obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. Other than the estimation of the probability of funding on such arrangements, the allowance for credit losses is estimated in a manner similar to the methodology used for funded credit exposures and as such, the Company estimates expected credit losses over the life of the instruments as of the reporting date based on relevant information about past events, current conditions, and reasonable and supportable forecasts. For off-balance sheet credit exposures, the allowance for credit losses is reported as a liability. As of December 31, 2021 there was no allowance for credit losses reported. Receivables from clearing broker. The Company's receivables from clearing broker include amounts receivable from unsettled trades, accrued interest receivables and cash deposits. The Company's trades and contracts are cleared through a clearing broker-dealer and settled daily between the clearing broker-dealer and the Company. Because of this daily settlement, the amount of unsettled credit exposures is limited to the amount owed the Company for a very short period of time. The Company continually reviews the credit quality of its counterparties. {9}------------------------------------------------ ## NOTES TO FINANCIAL STATEMENTS ## December 31, 2021 ## 1. Nature of business and summary of significant accounting policies (continued) ## Property and Equipment Property and equipment are stated at cost less accumulated depreciation and amortization. The Company provides for depreciation and amortization as follows: | Assets | Useful Life | |----------------------------|-------------------------------------| | Furniture and fixtures | 5 years | | Office and other equipment | 3 years | | Computer hardware | 3 years | | Computer software | 3 years | | Leasehold improvements | lesser of useful life or lease term | ## Income Taxes The Company uses the asset and liability method of accounting for income taxes. Under this method, the net deferred tax asset or liability is determined based on the tax effects of the differences between the book and tax basis of various assets and liabilities. The determination of the amount of deferred income tax assets which are more likely than not to be realized is primarily dependent on projections of future earnings which are subject to uncertainty and estimates that may change given economic conditions and other factors. The realization of deferred income tax assets is assessed and a valuation allowance is recorded if it is "more likely than not" that all or a portion of the deferred tax assets will not be realized. "More likely than not" is defined as a greater than a 50% chance. All available evidence, both positive and negative is considered to determine whether, based on the weight of that evidence, a valuation allowance is needed. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the "more likely than not" test no tax benefit is recorded. Based upon our analysis of available evidence, we have determined that no valuation allowance was necessary ### Use of Estimates The preparation of financial statements in conformity with GAAP requires the Company's management to make estimates and assumptions that affect the amounts disclosed in the financial statements. Actual results could differ from those estimates. ### Leases Lessees are required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (1) a lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a right-of-use asset, which is an asset that represents the lessee's right to use, or control the use of a specified asset for the lease term. The Company enters into leases in the normal course of business primarily for real estate for its local offices housing sales, underwriting, trading and financial advisory business, along with back office operations. SAMCO's leases have terms up to five years and some include renewal or termination options to extend the lease for up to five years. {10}------------------------------------------------ ## NOTES TO FINANCIAL STATEMENTS ## December 31, 2021 ## 1. Nature of business and summary of significant accounting policies (continued) The company includes lease extension and termination options in the lease term if, after considering relevant economic factors, it is reasonably certain the Company will exercise the option. In addition, the Company has elected to account for any non-lease components in its real estate leases as part of the associated lease component. The Company has also elected not to recognize leases with original lease terms of 12 months or less (short-term leases) on the Company's Statement of Financial Condition. ## 2. Fair value measurements | Statement of Financial Condition. | | | | | |---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------|------------------------------------------------------------|------------------------------------------------------|------------------------------------------| | Leases are classified as operating or finance leases at the lease commencement date.
determined to be operating leases. Right-of-use assets represent our right to use an underlying asset for the lease
term and lease liabilities represent our obligation to make lease payments arising from the lease. Right-of-use assets
and lease liabilities are recognized at the lease commencement date based on the estimated present value of lease
payments over the lease term. | | | | All of our leases were | | The Company uses its incremental borrowing rate at lease commencement to calculate the present value of lease
payments when the rate implicit in a lease is not known. The Company's incremental borrowing rate is based on
consideration of the current rates available to the Company from its bank and clearing broker borrowings, adjusted for
the lease term and other factors. | | | | | | 2.
Fair value measurements | | | | | | The Company's assets and liabilities recorded at fair value have been categorized based upon a fair value hierarchy
as described in the Company's significant accounting policies in Note 1. | | | | | | The following table presents information about the Company's assets measured at fair value on a recurring basis as
of December 31, 2021: | | | | | | | Quoted Prices
in Active
Markets for
Identical Assets
(Level I) | Significant
Other
Observable
Inputs
(Level II) | Significant
Unobservable
Inputs
(Level III) | Balance
as of
December 31,
2021 | | Assets (at fair value) | | | | | | Securities owned, at fair value
State and municipal obligations | \$
- | \$
38,682,886 | \$
- | \$
38,682,886 | | Total assets (at fair value) | \$
- | \$
38,682,886 | \$
- | \$
38,682,886 | | | | | | | | | | | | | {11}------------------------------------------------ ## NOTES TO FINANCIAL STATEMENTS ## December 31, 2021 ## 2. Fair value measurements (continued) | SAMCO CAPITAL MARKETS, INC. | | | | | |--------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------|------------------------------------------------------------|------------------------------------------------------|------------------------------------------| | NOTES TO FINANCIAL STATEMENTS | | | | | | December 31, 2021 | | | | | | 2.
Fair value measurements (continued) | | | | | | | | | | | | The following table presents information about the Company's liabilities measured at fair value on a recurring basis
as of December 31, 2021: | | | | | | | Quoted Prices
in Active
Markets for
Identical Assets
(Level I) | Significant
Other
Observable
Inputs
(Level II) | Significant
Unobservable
Inputs
(Level III) | Balance
as of
December 31,
2021 | | Liabilities (at fair value) | | | | | | Securities sold short, at fair value | | | | | | U.S. government obligations
U.S. corporate bonds | 4,969,822
\$
-
\$ | 1,230
\$ | -
- | 4,969,822
\$
1,230 | Certain financial instruments that are not carried at fair value on the statement of financial condition are carried at amounts that approximate fair value due to their short-term nature and generally negligible risk. These instruments include, receivables from clearing broker, due to clearing broker and other payables (all Level 1). ## 3. Property and equipment Details of property and equipment at December 31, 2021 are as follows: | Certain financial instruments that are not carried at fair value on the statement of financial condition are carried at
amounts that approximate fair value due to their short-term nature and generally negligible risk. These instruments
include, receivables from clearing broker, due to clearing broker and other payables (all Level 1). | | | |-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------|--| | | | | | | | | | Details of property and equipment at December 31, 2021 are as follows: | | | | Office equipment | \$
262,062 | | | Leasehold improvements | 558,488 | | | Furniture and fixtures | 161,442 | | | Computer hardware | 417,338 | | | Computer software | 25,230 | | | | 1,424,560 | | | Less: Accumulated depreciation and amortization | (1,366,331) | | | Property and equipment, net | \$
58,229 | | {12}------------------------------------------------ ## NOTES TO FINANCIAL STATEMENTS ## December 31, 2021 ### 4. Net capital requirement The Company, as a member of FINRA, is subject to the Securities and Exchange Commission Uniform Net Capital Rule 15c3-1. This Rule requires the maintenance of minimum net capital and that the ratio of aggregate indebtedness to net capital, both as defined, shall not exceed 15 to 1 and that equity capital may not be withdrawn or cash dividends paid if the resulting net capital ratio would exceed 10 to 1. At December 31, 2021, the Company's net capital was \$19,238,540, which was \$18,988,540 in excess of its minimum requirement of \$250,000. The Company's ratio of aggregate indebtedness to net capital was .14 to 1. Fixed assets (15,400) ### 5. Income taxes The Company is included in the consolidated federal income tax return and combined Texas franchise tax report filed by its parent, SAMCO Holdings, Inc. ("SHI"). The Company's operations are conducted in the states of Texas, California and Kansas. Income tax returns are subject to review by state and federal authorities for up to four years of filings. Deferred income taxes reflect the net tax effects of temporary differences between the recorded 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 as of December 31, 2021, were as follows: Deferred Tax Assets (Liabilities) | Pass through | \$
27,200 | |------------------------------|----------------| | | | | Prepaid expenses | (26,400) | | Net deferred tax (liability) | \$
(14,600) | ### 6. Defined contribution 401(k) Plan The Company maintains a retirement plan (the "Plan"), pursuant to Section 401(k) of the Internal Revenue Code, for eligible participants to make voluntary contributions of a portion of their annual compensation, on a deferred basis, subject to limitations provided by the Internal Revenue Code. The Company may make a contribution to employee accounts at the discretion of the Board of Directors. ### 7. Off-balance sheet risk Pursuant to clearance agreements, the Company introduces all of its securities transactions to a clearing broker on a fully-disclosed basis. All of the customers' money balances and long and short security positions are carried on the books of the clearing broker. In accordance with the clearance agreements, the Company has agreed to indemnify the clearing broker for losses, if any, which the clearing broker may sustain from carrying securities transactions introduced by the Company. In accordance with industry practice and regulatory requirements, the Company and the clearing broker monitor collateral on the customers' accounts. As of December 31, 2021, there were no amounts to be indemnified to the clearing broker for these accounts. In addition, the receivables from the clearing broker are pursuant to these clearance agreements and includes a clearing deposit of \$105,600. {13}------------------------------------------------ ## NOTES TO FINANCIAL STATEMENTS ## December 31, 2021 ### 8. Related party transactions SAMCO pays its parent Company, SAMCO Holdings, Inc., its portion of its income taxes. The Company has approximately \$230,993 due to SAMCO Holdings, Inc. at December 31, 2021. This payable represents a federal income tax liability and is included in Accounts Payable in the accompanying statement of financial condition. ## 9. Loan, Paycheck Protection Program The Company received a loan from Frost Bank in the amount of \$1,354,500 under the Paycheck Protection Program established by the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The loan was subject to a note dated April 22, 2020 and could be forgiven to the extent proceeds of the loan were used for eligible expenditures such as payroll and other expenses described in the CARES Act. As of December 31, 2021, the Company received notice from Frost Bank that the PPP was fully forgiven. ## 10. Due to clearing broker The amount due to clearing broker is due on demand and is collateralized by all Company-owned securities held by, or deposited with, the clearing broker, Pershing, LLC. Interest is charged at the clearing broker's call rate. ## 11. Concentrations of credit risk In the normal course of business, the Company's customer activities involve the execution, settlement, and financing of various customer securities transactions. These activities may expose the Company to off-balance-sheet risk in the event the customer or other broker is unable to fulfill its contracted obligations and the Company has to purchase or sell the financial instrument underlying the contract at a loss. The Company maintains its cash balances in various financial institutions. These balances are insured by the Federal Deposit Insurance Corporation up to \$250,000 per institution. {14}------------------------------------------------ # NOTES TO FINANCIAL STATEMENTS ## December 31, 2021 ## 12. Leases Lease Obligations Future undiscounted lease payments for operating leases with initial term lease of one year or more as of December 31, 2021 are as follows: | 2022 | \$
583,249 | |----------------------------------------------------|-----------------| | 2023 | 308,788 | | 2024 | 249,496 | | 2025 | 7,563 | | Total Future Minimum Lease Payments (Undiscounted) | 1,149,096 | | Discounting effect on cash flows | (54,243) | | Lease Liability | \$
1,094,853 | | | | Other information related to operating leases as of December 31, 2021 was as follows: | Weighted average remaining lease term | 28 months | |---------------------------------------|-----------| | Weighted average discount rate | 4.0% | Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.