Siebert Financial Corp. — FY2021 Form 10-K
Business context and reporting period. This annual report covers the fiscal year ended December 31, 2021; it does not provide standalone fourth-quarter results. Siebert provides retail brokerage, investment advisory, insurance, technology, and prime brokerage services. The financial statements consolidate RISE, in which Siebert held a 76% interest at year-end, and report one operating segment.
Financial performance and position
| Metric | FY2021 / Dec. 31, 2021 | FY2020 / Dec. 31, 2020 | Change |
|---|---|---|---|
| Revenue | $67.507 million | $54.872 million | +23.0% |
| Income before taxes | $6.754 million | $3.196 million | +111.3% |
| Net income available to common stockholders | $5.063 million | $2.975 million | +70.2% |
| Basic and diluted EPS | $0.16 | $0.10 | — |
| Net cash from operating activities | $5.543 million | $96.717 million | Down; prior year included large securities-borrowing and lending balance movements |
| Cash and cash equivalents | $3.758 million | $3.632 million | +$0.126 million |
| Total assets / total liabilities | $1.404 billion / $1.354 billion | $1.373 billion / $1.335 billion | Assets +$31.248 million; liabilities +$18.728 million |
Income before taxes was about 10.0% of revenue, versus 5.8% in 2020; net income available to common stockholders was about 7.5% of revenue, versus 5.4%. Total expenses rose 17.9% to $60.925 million. Unrestricted cash was $3.758 million; a further $326.826 million was segregated for regulatory purposes and is not ordinary operating cash.
Year-end debt included $7.708 million of East West Bank long-term debt and $7.0 million of notes payable to principal stockholder Gloria E. Gebbia. The company also had a $15 million overnight borrowing facility with no outstanding balance, and $5 million of additional capacity under its East West Bank line of credit. Management said liquidity and borrowing capacity were sufficient for operating and other needs over the next 12 months.
Total assets under management were $17.3 billion, versus $16.2 billion. Retail customer net worth increased to $16.8 billion from $14.6 billion; retail accounts rose to 115,380 from 110,699, while retail trades were nearly unchanged at 472,540. Institutional customer net worth fell to $0.5 billion from $1.6 billion.
Material changes and notable items
- Stock borrow/stock loan revenue rose to $11.864 million from $4.045 million, attributed to personnel, expanded stock-locate revenues, and additional counterparties. Principal transaction and market-making revenue also increased, which management attributed primarily to favorable market conditions.
- Commissions and fees fell to $18.252 million from $20.179 million, primarily because RISE lost institutional customers after Goldman Sachs & Co. LLC (GSCO) terminated its clearing arrangement. Interest, marketing, and distribution fees declined to $12.897 million from $14.195 million, reflecting lower money-market 12b-1 fees and interest on retail deposits.
- Employee compensation and benefits increased $7.922 million to $36.424 million, largely alongside higher transaction-related revenue. The company recorded a $699,000 impairment of RISE customer relationships after the GSCO termination.
- MSCO renewed its National Financial Services (NFS) clearing agreement through July 31, 2025, receiving a $3 million business-development credit and four annual $100,000 credits. The credits reduced 2021 clearing expense by $354,000; management anticipated approximately $850,000 of annual expense reduction in subsequent years through the agreement’s end. Early termination fees range from $8 million to $3.25 million depending on termination date.
- Siebert acquired a Miami office building for approximately $6.8 million, financed in part with a $4 million mortgage and $2 million in related-party borrowing. The mortgage has a 10-year term and a balloon payment; approximately $700,000 of build-out costs was expected in 2022.
- In November 2021, Siebert exchanged a 24% interest in RISE and 1,449,525 Siebert shares for a 24% interest in Tigress Holdings. Siebert recognized $172,000 of equity-method earnings from Tigress.
- The planned OpenHand zero-commission brokerage partnership was terminated in August 2021. Siebert retained a 2% interest purchased for $850,000 and an option to acquire an additional 2%; the issued Siebert shares were rescinded.
Outlook, risks, contingencies, and governance
Management provided no specific revenue or earnings guidance. It said it believes operating cash flows, available cash, borrowing capacity, and capital-market access can fund requirements for the next 12 months. Management described RISE’s relaunch as a woman-owned prime brokerage as a new and untested strategy, with uncertainty about attracting customers and revenue. It also noted that the NFS credits should reduce future clearing expenses.
Key risks include market activity and interest-rate sensitivity, intense competition including zero-commission brokers, regulatory and net-capital requirements, customer and counterparty credit exposure, cybersecurity and dependence on third-party systems, and the ability to retain key personnel. COVID-19’s principal reported financial effect was lower interest revenue; management said it had not materially affected liquidity or operations.
A FINRA investigation into pre-acquisition StockCross unit investment trust transactions remains unresolved. Management could not estimate its duration or outcome; possible sanctions or customer restitution could be material. Two other pre-acquisition matters were resolved in 2021, with a $250,000 FINRA fine and a $100,000 California payment; customers rejected the related offer of approximately $315,000 in restitution. The company reported $2.418 million in unrecognized tax benefits at year-end.
A Form S-3 shelf registration effective March 2, 2022 permits potential offerings of up to $100 million in securities, subject to the baby-shelf limitation, creating potential dilution. The Gebbia family controlled more than 50% of voting power for director elections. The auditor gave an unqualified opinion on the financial statements, and management concluded disclosure controls and internal control over financial reporting were effective.
Important facts for investors to verify
- Whether RISE has secured a replacement clearing and customer base after the GSCO termination, and the resulting effect on revenue, earnings, and institutional assets.
- Actual cash generation and liquidity available for corporate use, distinguishing unrestricted cash from customer-protection reserve balances and considering near-term debt maturities.
- Performance and terms of the NFS clearing agreement, including recognition of credits, future expense reductions, and potential early-termination fees.
- Outcome and potential financial exposure from the outstanding FINRA UIT investigation and the company’s tax uncertainties.
- Any issuance under the effective shelf registration, resulting dilution, and subsequent changes in RISE ownership or related-party financing.