# EMPIRE STATE FINANCIAL, INC. X-17A-5 (2022-04-18) — Broker-dealer annual report - Company: EMPIRE STATE FINANCIAL, INC. - Form: X-17A-5 - Filed: 2022-04-18 - Period: 2021-12-31 - Accession: 0000046194-22-000001 - CIK: 46194 - File #: 8-16309 - Type: Broker-dealer - Material weakness: No - Auditor: Reid CPAs - Auditor location: Woodbury, NY - Contact: Joseph Sipkin - Phone: 917-579-9152 - Signed by: Bryan Glass (President) Original filing: https://www.sec.gov/Archives/edgar/data/46194/000004619422000001/esf21s.pdf --- {0}------------------------------------------------ # EMPIRE STATE FINANCIAL, INC. STATEMENT OF FINANCIAL CONDITION FOR THE YEAR ENDED DECEMBER 31, 2021 {1}------------------------------------------------ ### This filing\*\* contains (check all applicable boxes): - m (a) Statement of financial condition. - 00 (b) Notes to unconsolidated or consolidated statement of financial condition, as applicable. D (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 nows. - D (e) Statement of changes in stockholders' or partners' or members' or sole proprietor's equity, as applicable. - 10 (f) Statement of changes in liabilities subordinated to clajms of creditors. - D (g) Notes to unconsolidated or consolidated financial statements,, as applicable. - D (h) Computation of ner capital under 17 CFR 240.1 Sc3-1 or I 7 CFR 240. l 8a-1, as applicable. - 0 (i) Computation of tangible net worth under 17 CFR 240. I 8a-2. - 0 U) Computation for determination of customer reserve requirements pursuant to Exhibit A to 17 CFR 240. I 5c3-3. - D (k) Computation for determination of security-based swap reserve requirements pursuant to Exhibit B to 17 CFR 240. I 5c3- 3 or Exhibit A to 17 CFR 240.18a-4, as applicable. - 0 (I) Computation for Determination of PAB Requirements under Exhibit A to § 240. l ScJ-3. - 0 (m) Information relating to possession or control requirements for customers under I 7 CFR 240.1 ScJ-3. - D (n) Information relating to possession or control requirements for security-based swap customers under 17 CFR 240. I 5c3- 3(p)(2) or 17 CFR 240. I 8a-4, as applicable. - D (o) Reconci liations, including appropriate explanarions, of the FOCUS Report with computation of net capital or tangible net worth under I 7 CFR 240. I 5c3-I, 17 CFR 240. I 8a-I, or 17 CFR 240.18a-2. as applicable, and the reserve requirements under 17 CFR 240. I 5c3-3 or 17 CPR 240. I 8a-4, as applicable, if material differences exist, or a statement that no materi a I differences exist. - D (p) Summary of financial data for subsidiaries not consolidated in the statement of financial condition. - CE! (q) Oath or affirmation in accordance with 17 CFR 240. 17a-5, 17 CFR 240. I 7a-12, or 17 CFR 240.1 Sa-7, as applicable. - 0 (r) Compliance report in accordance with 17 CFR 240. I 7a-5 or 17 CFR 240. I 8a-7. as applicable. - 0 (s) Exemption report in accordance with 17 CFR 240. I 7a-5 or 17 CFR 240. I 8a-7, as applicable. - CE! (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 CFR 240.18a-7, or 17 CFR 240.17a-1 2, as applicable. - 0 (v) Independent public accountant's report based on an examination of certain statements in the compliance report under 17 CFR 240.17a-S or 17 CFR 240.18a-7, as applicable. - 0 (w) Independent public accountant's report based on a review of the exemption report under 17 CFR 240. I 7a-5 or 17 CPR 240. I 8a-7, as applicable. - 0 (x) Supplemental reports on applying agreed-upon procedures, in accordance with 17 CFR 240. I ScJ- I e or 17 CFR 240. I 7a-I 2, as applicable. - D (y) Report describing any material inadequacies found to exist or found Lo have existed since the date of the previous audit, or a statement that no material inadequacies exist, under 17 CFR 240.17a-12(k). D(z) Other:--------------------------------- -- - *.. To request confidential treatment of certain portions q( this filing, see 17 CFR 240. I 7a-5(e){3) or 17 CFR 240.* J *8a-7(d}(2), as applicable.* {2}------------------------------------------------ ![](_page_2_Picture_0.jpeg) # REPORT OF INDEPENDENT REGISTERED PUBLJC ACCOUNTING FIRM To the Board of Directors and Shareholders of Empire State Financial, Inc. #### Opinion on the Financial Statements We have audited the accompanying statement of financial condition of Empire State Financial, Inc. as of December 3 1, 2021, and the related notes and supplemental schedules (collectively referred to as the "financial statements''). In our opinion, the financial statements present fairly, in all material respects, the financial position of Empire State Financial , Inc. as of December 31. 202 I, in conformity with accounting principles generally accepted in the United States of America. #### Basis for Opinion These financial statements are the responsibility of Empire State Financial. fnc.'s management. Our responsibility is to express an opinion on Empire State Financial, Inc.'s financial statements based on our audit. We are a public accounting firm registered with the Pubnic Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to Empire State Financial. Inc. in accordance with the U.S. federal securities laws and the applicable rules and regularions 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 audi1 to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included perfonning procedures to assess the risks of material misstatement of the financial statements, 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 statements. 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 statements. We believe 1hat our audit provides a reasonable basis for our opinion. We have served as Empire State Financial Tnc. auditor since 20 19. Woodbury, NY April I 4, 2022 # REID CPAs, LLP Woodbury I New York I Boca Raton 7600 Jericho Turnpike, Suite 400, Woodbu1 y, NY 11797 P. 516-802-0100 W ReldLLP.com {3}------------------------------------------------ # EMPIRE STATE FINANCIAL, INC. STATEMEI\ T OF FINANCIAL CONDITION DECEMBER 3 t. 202 I ### ASSETS | Cash | \$
252,458 | |-------------------------------------------------------------------------------------------------------------|---------------| | Due from clearing broker | 187,760 | | Deposit with clearing finn | 250,023 | | Securities long | 679,856 | | Due from stockbo lder | 80, 129 | | Other assets | 88,994 | | | | | Total assets | \$ 1,539,220 | | LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities: | | | Accounts payable and accrued expenses | \$
158,578 | | Bank loan payable | 150,000 | | | 308,578 | | Commitments and Contingencies | | | Stockholder's equity | | | Preferred stock, \$.01 par va
lue, authorized 10,000
shares authorized and outstanding I 0,000 shares | 100 | | Comrmn stock, \$.01 par value, authorized 2,000,000
shares, 440,000 shares outstanding | 8,898 | | Addifunal paid in capital | 245,773 | | Retained earnin~ | 1,123,886 | | Total | 1,378,657 | | Less 449,889 shares of common stock in Treaswy, at cost | (148,015) | | Stockhokler's equity | 1,230,642 | | Total Ii.abilities and stockhoklers equrty | \$ 1,539,220 | CONFIDENTIAL TRFATMENT REQUEST ED {4}------------------------------------------------ # EMPIRE STATE FINANCIAL, l'\JC. NOTES TO FINANCIALS FOR TllE YEAR ENDED DECEMBER 31, 2021 #### Note 1. Nature of Business Empire State Financial, Inc. (The "Company") was incorporated in the state of New York to engage in the general busim:s:. of a broker or dealer in securities. The Company is a member of the Financial Industry Regulatory Authority, and is registered with the Sc<.:uritics and Exchange Commission. The Company operates under the provisions of Paragraph (k)(2)(ii) of Rttle I Sc3- 3 of the Securities and Exchange Commission and, accordingly, is exempt from the remaining provisions of that rule. Essentially, the requirements of Paragraph (k)(2)(ii) provide lhal the Company clears all transactions on behalf of customers on a fully disclosed basis with a clearing broker/dealer, and promptly rransmits all customer funds and sccuritjes to the clearing broker/dealer. The clearing broker dealer carries all of the accounts of the customers and maintains and preserves all related books and records as are customariJy kept by a clearing broker/dealer. ## Note 2. Summary of Significant Accounting Policies #### Reve1111e Recog11irio11 Effect1ve January I. 2018, the Company adopted ASC Topic 606, Revenue from Contracts with Customers ('1 ASC Topic 606"). The new revenue recognition guidance requires that an entity recognize re\ enue due 10 depict the transfer of promised goods or services to cuscomers in an amount that renects 1he consideration to which the entity expects to be entitkd in exchange for those goods or services. Thi.! guidance requires an entity to foLJow a five c:;tep model to (a) identify the contract(s) with a customer, (b) identify the performance obligations in the contract, (c) determine the tran action price, {d) allocate the transaction price to the perfonnance obligations in the contract, and (c) recognize revenue when (or as) the entity satisfies a perfon11ance obligation. In determining th!.! transaction price, an entity may include variable consideration only to the extent that it is probable that a significant reversal in 1he amount of ctLmulativc revenue recognized would not occur \Vhcn the uncertainty associated wilh the variable consideration i resolved. The Company applied the modified retrospective method of adoption which resulted in no ad1ustment to retained earnings as of January I. 2018. The new revenue recognition guidance does not apply to revenue associated with financial instruments, interest incom~ and expense, leasing, and insurance contracts. #### Commissions The Company buys and sells securities on behalf of its customers. Each time a cus1omer enters imo a buy or sell transaction, the Company charge a commission. Commission and rdated clearing expenses are recorded on the trnde date. The Company has determined that the perfonnonce obligation i sarisfied on the trade dare becau e rhar is when the underlying financi::il instrument, counter parties are identified. the pricing is agreed upon and the risks and rewards of ownership have transferred to/from the customer. {5}------------------------------------------------ ### EMPll~E STATE FIXANClAL, INC. NOTES TO FINANCIALS FOR THE YEAR ENDED DECFMBER 31, 2021 ## Note 2. Summary of Significant Accounting Policies (co ntinued) #### *Fair Value Nlcmmre111e11ts* The Company carries its invesrmenrs al fair value. ASC 820, *Fair l'alue Measurements und Disclosure.* defines fair value *as* the price thnl would be received to sell an asset or paid to transfer a liabiliry (i.e., the "exit price") in an orderly transaction between market participants at the measurement date. ASC 820 establishe a fair \'alue hierarchy for inputs used in rneasuring fair value rhnt maximizes the use of observable inputs ancl minimizes tbe use of unobservabk inputs by requiring that the most observable inputs be used when available. The fair value hierarchy is categorized into three levels based on the inputs as foUows: - Level I Fair values derived from unadjusted quoted prices of identical assets in active markets. - Level 2 Fair values derived from quoted prices of similar asset in active markets, quoted prices for identical or similar assets in markets that are not active and model driven valuaLions in which all significant inputs are observable in active markets. - Level 3 Fair values derived from inputs which are not observable rn markets. #### Caslt and Cash £q11iV..-pense is the tax payable or refondable for the pe1iod plus or minus the change during the period in deferred rax assets and liabilities. #### *Allowtmcefor Credit Losses* ASC Topic 326. Financial Instruments - Credit Losses ("ASC 326") impacts the impairmenl model for certain financial assets by req11iring a current expecied credit los ("CECL") methodology to estiman: expected credit losses over the entire life of tbe financial asset. Und~r ASC 326, the Company could determine there arc no expected credit los e m certain circumsrances (e.g., based on the credit quality of the client). The a llowance for credit losses is based on the Company's expectation of the collectability of financial instruments, including fees and other receivables utilizing the CECL framework. The Company considers factors such as historical experience, credit quality. age of balances and current and future economic conditions that may affect the Company's expectaiion of the collectability in determining the allowance for credit losses. Under the standard. the allowance for credit losses must be deducted from the amortized cost of the financial asset ro present the net amount expected to be collected. The statement of operations woulu reflect lhe measurement of credit losses for newly reco&rnized tinancinl assets as well as the expected increases or decreases of expected credit losses that might have taken place during the period. The Company has not provided an allowance for credit losses al December 31, 2021. ### Note 3. Commitments and Contingencies #### Office Space The Company leases office space on a month-to-month basis. The rent is payments of \$3.950 monthly. {7}------------------------------------------------ # EMPIRE STATE FINANCIAL. l~C. lQTES TO Fl ANCIALS FOR Tl IE YEAR ENDED DECEMBER 31, 2021 #### Note 4. Related Pa r·ty The Company lent the Stockholder \$80,1 29. The loan is non-inrerest bearing and has no manirity. The repayment will be at rhe discretion of the stockholder to maintain margin collateral in compliance with various reb'ltlatory requirements and the clearing broker's internal guidelines. The Company monitors its customers' acti\ity by re\·iewing infonnation 11 receives from its clearing broker on a daily basi . and requiring customers to deposit additional collateral, or reduce positions when necessary. ### Note 5. Financial Jnstruments with Off-BaJance Sheet Credit Risk As a securities broker. the Company is engaged in buying and elling securities for a diverse group of in tit11tiona l and individua l investors. The Company introduces these transactions for clearance to another broker-dealer on a fully disclosed basis. The Company's exposure to credit risk associated with non-perfonnance of customers in fulfilling their contractual obligations pursuant to securities transactions can be directly impacted by volatile trading markets which may impair customers' ability to satisfy their obligations to the Company and the Company's ability to liquidate the collateral at an amount equal to the original contracted amount. The agreement between the Company and its clearing broker provides that the Company is obligated lo assume any exposure related to such non-perfonnance by its customers. The Company seeks to control the aforementioned risks by requiring customers to maintain margin collateral in compliance with various regulatory requirements and the clearing broker's internal guidelines. The Company monitors its customer activity by reviewing information it receives from its clearing broker on a daily basis, and requiring customers ro deposit additional c0Uateral1 or reduce positions, when necessary. ### Note 6. Net Capital Requirement The Company is subject to the Securities and Exchange Commission's Net Capital Ru le (Rule I 5c3- I), which requires the maintenance of minimum net capital and requires that the ratio of aggregate indebtedness to net capital, both as defined, shaU not exceed 1500%. At December 31, 2021, the Company had net capital of\$385,366, which was \$364,793 in excess of its required net capital of \$5,000. The Company's net capital ratio was 80.07%. {8}------------------------------------------------ # EMPIRE STATE FINANCIAL, INC. NOTES TO FINANCIALS FOR THE YEA R ENDED DECEMBER 31, 2021 # Note 7. lnvestments, at Fair Value The Company adopted ASC 820, Fair Value Measurements ("ASC 820"). ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Levell measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three level of the fair value hierarchy under ASC 820 are as follows: Level !--Quoted prices (unadjusted) in active markets for identical investments at the measurement date. Level 2-Pricing inputs are other than quoted prices included within Level I that are observable for the investment, either directly or in directly. Level 2 pricing inputs include quoted prices for similar investments in active markets, quoted prices for identical or similar investments in markets that are not active, inputs other than quoted prices that are observable for the investment, and inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 3-Pricing inputs are unobservable for the investment and are based on the Company's own assumptions about the assumptions that a market participant would use, including inputs derived from extrapolation and interpolation that are not corroborated by observable marker data. Jn some cases, the inputs used to measure fair value might fa ll in different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the investment in its entirety falls is determined based on the lowest level input that is significant to the investment in its entirety. Assessing the significance of a particular input to the investment in its entirety requires judgment and considers factors specific to the investment. The categorization of an investment within the hierarchy is based upon the pricing transparency of the investment and does not necessarily correspond to the Company ' s perceived risk of that investment. At December 3 I, 2021 , the Company's investments are classified within Level r as they were traded in active markets. Fair value was calculated based on the quoted market prices at the measurement date. | | Level 1 | | Lcvel2 | | Level 3 | | | |-----------------------|---------|---------|--------|--|---------|--|-----------| | Securities Long | | | | | | | | | Equties | \$ | 679.856 | \$ | | \$ | | \$679,856 | | Total Securities Long | \$ | 679,856 | \$ | | \$ | | \$679,856 | | | | | | | | | | {9}------------------------------------------------ # E:\IPIRE TATE Fl:\'.ANCrAL, JNC. NOTES TO FINANCIALS FOR THE YEAR ENDED DECEMBER 31, 2021 #### Note 8. Compliance with Rule 15c3-3 The Company claims exemption from the requirements of Rule I 5c3-3, under Section (k)(2)(ii) of the Rule. #### Note 9. Note Paya ble #### Bank Loan The Comp:my obtained a loan from the Small Business Administration on July 12. 2020. for \$I 50.000. The loan matures on July 12, 2050 and has an interest rate of 3. 75%. The loan repayment begins on July 12, 2022, whereby lhe Company will make monlhiy payments of \$731. ### Note 10. Subsequent Events The Company has performed an evaluation of events tbai have occurred subsequent to December 31. 2021, and through April 14. 2022, the date of the tiling of this report. There have been 110 material subsequent e\'ents that occurred during such period that would require disclosure in this report or would be required to be recognized in the financial statements as of December 3 J. 202 1. A copy of the Fim1's i.tatcment of Finai1c111t Condi11011 as of December 31. 2021. pur~uant l{l SEC Rule t 7a-*5.* is a\ aitable for examination at the Ftrm'i. otlicc and at rhc regional office of rhe SEC. CONFIDENTIAL TREATM ENT REQUESTED Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.