Clearfield, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Note 3 - Investments

Note 3 - Investments

12 Months Ended

Sep. 30, 2023

Note 3. Investments

The Company invests in CDs in amounts that are fully insured by the FDIC and Treasuries with terms of not more than five years, as well as money market funds. During the second quarter of fiscal 2022, the Company sold investments and has reclassified its investment portfolio to available-for-sale, which is reported at fair value. The unrealized gain or loss on investment securities is recorded in other comprehensive income (loss), net of tax. Realized gains and losses on available-for-sale securities are recognized upon sale and are included in net investment income in the consolidated statement of earnings. The Company did not sell investment securities during the years ended September 30, 2023.

As of September 30, 2023, available-for-sale investments consist of the following:

	September 30, 2023
(In thousands)	Cost		Unrealized Gains		Unrealized Losses		Fair Value
Short-Term
U.S. treasury securities	$	122,534	$	-	$	143	$	122,391
Certificates of deposit		8,014		-		119		7,895
Investment securities – short-term	$	130,548	$	-	$	262	$	130,286
Long-Term
U.S treasury securities	$	6,719	$	-	$	596	$	6,123
Certificates of deposit		248		-		28		220
Investment securities – long-term	$	6,967	$	-	$	624	$	6,343

As of September 30, 2022, available-for-sale investments consisted of the following:

	September 30, 2022
(In thousands)	Cost		Unrealized Gains		Unrealized Losses		Fair Value
Short-Term
Certificates of deposit	$	5,945	$	-	$	143	$	5,802
Investment securities – short-term	$	5,945	$	-	$	143	$	5,802
Long-Term
U.S treasury securities	$	16,178	$	-	$	1,085	$	15,093
Certificates of deposit		8,016		-		362		7,654
Investment securities – long-term	$	24,194	$	-	$	1,447	$	22,747

The Company did not sell any investments in the year ended September 30, 2023. For the year ended September 30, 2022, proceeds from the sale of investments was $14,365,000, upon which the Company realized within earnings gross realized gains on the sale of $92,000 partially offset by gross realized losses of $53,000. The specific identification method is used to determine the cost of the securities sold. The Company’s sale of investment securities was associated with its need to respond to significant unanticipated and unprecedented growth in its sales order backlog coupled with supply chain challenges to obtain the inventory necessary for fulfillment of these orders, as well as the reevaluation of the Company’s approach to use of available capital.

As of September 30, 2023, investments in debt securities in an unrealized loss position were as follows:

	In Unrealized Loss Position For Less Than 12 Months				In Unrealized Loss Position For Greater Than 12 Months
(In thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
U.S treasury securities	$	112,908	$	131	$	15,606	$	608
Certificates of deposit		245		-		7,870		147
Investment securities	$	113,153	$	131	$	23,476	$	755

As of September 30, 2022, investments in debt securities in an unrealized loss position were as follows:

	In Unrealized Loss Position For Less Than 12 Months				In Unrealized Loss Position For Greater Than 12 Months
(In thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
U.S treasury securities	$	-	$	-	$	15,093	$	1,085
Certificates of deposit		6,345		176		7,111		329
Investment securities	$	6,345	$	176	$	22,204	$	1,414

As of September 30, 2023, there were 42 securities in an unrealized loss position which is due to the securities paying lower interest rates than the market. As of September 30, 2023, there are no securities which are other than temporarily impaired as the Company intends to hold these securities until their value recovers and there is negligible credit risk due to the nature of the securities which are backed by the FDIC and US federal government.