# WESBANCO SECURITIES, INC. X-17A-5 (2022-03-30) — Broker-dealer annual report
- Company: WESBANCO SECURITIES, INC.
- Form: X-17A-5
- Filed: 2022-03-30
- Period: 2021-12-31
- Accession: 0001039235-22-000002
- CIK: 1039235
- File #: 8-50220
- Type: Broker-dealer
- Material weakness: No
- Auditor: Ernst & Young
- Auditor location: Pittsburgh, PA
- Contact: Rose L. Wilson
- Phone: 304-905-7215
- Signed by: Rose L. Wilson (SVP & Managing Director Wealth Compliance)
Original filing: https://www.sec.gov/Archives/edgar/data/1039235/000103923522000002/2021annualreports-1.pdf
---
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#### **Audited Financial**
**WesBanco Securities, Inc.** (A Wholly Owned Subsidiary of WesBanco, Inc.) Year Ended December 31, 2021 With Report of Independent Registered Public Accounting Firm
*This report is deemed confidential in accordance with Rule 17a5-(e)(3) under the Securities Exchange Act of 1934. A statement of financial condition and report of the independent registered public accounting firm have been separately filed with the Securities and Exchange Commission simultaneously herewith as a public document.*
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### AUDITED FINANCIAL STATEMENTS AND SCHEDULES
Wesbanco Securities, Inc. (A Wholly-Owned Subsidiary ofWesbanco, Inc.) Year Ended December 31, 2021 With Report of Independent Registered Public Accounting Firm
*This report is deemed confidential in accordance with Rule 17a5-(e)(3) under the Securities Exchange Act of 1934. A statement of financial condition and report of the independent registered public accounting firm have been separately filed with the Securities and Exchange Commission simultaneously herewith as a public document.*
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# Audited Financial Statements and Schedules
Year Ended December 31, 2021
# **Contents**
| Report oflndependent Registered Public Accounting Firm 1 | | | | | | |
|------------------------------------------------------------------------------------------------|--|--|--|--|--|--|
| Audited Financial Statements | | | | | | |
| Statement of Financial Condition 2 | | | | | | |
| Statement of Operations 3 | | | | | | |
| Statement of Changes in Shareholders' Equity .4 | | | | | | |
| Statement of Cash Flows 5 | | | | | | |
| Notes to Financial Statements 6 | | | | | | |
| Supplemental Information Required by Rule 17a-5 of the Securities and
· Exchange Commission | | | | | | |
| Computation of Net Capital Under Rule 15c3-1 13
Schedule I - | | | | | | |
| Computation for Determination of the Reserve Requirements Under
Schedule II - | | | | | | |
| Exhibit A of SEC Rule 15c3-3 14 | | | | | | |
| Schedule III -
Information Relating to the Possession or Control Requirements to | | | | | | |
| SEC Rule 15c3-3 15 | | | | | | |
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2100 One PPG Place Fax: +l 412 644 0477 Pittsburgh, PA 15222 ey.com
Ernst & Young LLP Tel: +1412 644 7800
### **Report of Independent Registered Public Accounting Firm**
To the Shareholders and the Board of Directors ofWesbanco Securities, Inc.
#### **Opinion on the Financial Statements**
We have audited the accompanying statement of financial condition of Wesbanco Securities, Inc. {the Company) as of December 31, 2021, the related statements of operations, changes in shareholders' equity and cash flows for the year then ended, and the related notes (collectively referred to as the "financial statements•). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021, and the results of its operations and its cash flows for the year then ended in conformity with U.S. generally accepted accounting principles.
#### **Basis for Opinion**
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements 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 statements are 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 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 that our audit provides a reasonable basis for our opinion.
#### **Supplemental Information**
The accompanying information contained in Schedules I, 11, and Ill has been subjected to audit procedures performed in conjunction with the audit of the Company's financial statements. Such information is the responsibility of the Company's management. Our audit procedures included determining whether the information reconciles to the financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information. In forming our opinion on the information, we evaluated whether such information, including its form and content, is presented in conformity with Rule 17a-5 under the Securities Exchange Act of 1934. In our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole.
as the Company's auditor since 1999. ~
We March have 30, served 2022
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# Statement of Financial Condition
December 31, 2021
### **Assets**
| Cash (restricted \$250,000) | \$
1,872,258 |
|------------------------------------------------------------|-----------------|
| Commission receivables | 513,645 |
| Deferred tax assets | 67,315 |
| Prepaid expenses | 76,193 |
| Fixed assets (net of accumulated depreciation of\$54,064) | 17,610 |
| Other assets | 39,309 |
| Total assets | \$
2,586,330 |
| Liabilities and shareholders' equity | |
| Liabilities: | |
| Accounts payable to affiliate | \$
312,135 |
| Commission payable to affiliate | 235,257 |
| Other liabilities | 75,431 |
| Total liabilities | 622,823 |
| Shareholders' equity: | |
| Connnon stock, par value \$1 per share -
authorized 500 | |
| shares, issued and outstanding 100 shares | 100 |
| Additional paid-in capital | 1,775,533 |
| Retained earnings | 187,874 |
| Total shareholders' equity | 1,963,507 |
| Total liabilities and shareholders' equity | \$
2,586,330 |
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# Statement of Operations
# Year Ended December 31, 2021
| Revenues | |
|--------------------------------|-----------------|
| Commissions | 7,229,122
\$ |
| Other | 3,044 |
| | 7,232,166 |
| Expenses | |
| | |
| Salaries and benefits | 2,601,415 |
| Employee co111rIIBsion expense | 2,568,243 |
| Management service fees | 541,781 |
| Clearing fees | 323,599 |
| Insurance expense | 281,456 |
| Occupancy and equipment | 156,529 |
| Other operating expenses | 139,785 |
| General administrative expense | 124,575 |
| Professional fees and expenses | 123,413 |
| Amortization and depreciation | 2,950 |
| | 6,863,746 |
| | |
| Income before income taxes | 368,420 |
| Income tax expense | 125,403 |
| Net Income | 243,017
\$ |
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# Statement of Changes in Shareholders' Equity
Year Ended December 31, 2021
| | | | | Additional | | Retained | | Total |
|----------------------------------|-------|--------|---------|--------------|-----------|-------------|--------|---------------|
| | | Common | | Paid-In | | Earnings | | Shareholders' |
| | Stock | | Capital | | (Deficit) | | Equity | |
| | | | | | | | | |
| Balance at December 31
, 2020 | \$ | 100 | | \$ 1,775,533 | \$ | (55,143) \$ | | 1,720,490 |
| Net Income | | | | | | 243,017 | | 243,017 |
| Balance at December 31, 2021 | \$ | 100 | | \$ 1,775,533 | \$ | 187,874 | \$ | 1,963,507 |
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# Statement of Cash Flows
# Year Ended December 31, 2021
| Operating activities | |
|--------------------------------------------------|-----------------|
| Net Income | \$
243,017 |
| Adjustments to reconcile net income to net cash | |
| provided by operating activities: | |
| Amortization and depreciation expense | 2,950 |
| Increase in operating assets: | |
| Commission receivables | (36,892) |
| Other assets | (2,635) |
| Increase (decrease) in operating liabilities: | |
| Accmmts payable to affiliates | (258,964) |
| Commissions payable | 25,498 |
| Other liabilities | (19,859) |
| Net cash used in operating activities | (46,885) |
| Net decrease in cash | (46,885) |
| Cash at beginning of year (restricted \$250,000) | 1,919,143 |
| Cash at end of year (restricted \$250,000) | \$
1,872,258 |
| Supplemental disclosure | |
| Payments to affiliate for income taxes | \$
321,268 |
| | |
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# Notes to Financial Statements
December 31, 2021
### **1. Organization**
Wesbanco Securities, Inc. (the "Company") is a wholly-owned subsidiary of Wesbanco, Inc. (the "Parent"). The Company is registered as a broker/dealer under the Securities and Exchange Act of 1934 and is a member of Financial Industry Regulatory Authority, Inc. ("FINRA") and Securities Investors Protection Association ("SIPC").
The Company offers financial planning, wealth management, individual retirement account ("IRA") and 401(k) rollover, retail brokerage services relating to securities such as insurance and mutual fund products, stocks, options, and bonds on a fully disclosed basis. The Company also operates as a registered investment advisor.
# **2. Significant Accounting Policies**
### **Basis of Presentation**
The Financial Statements include the accounts of the Company. Such statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). In preparing the Financial Statements, management is required to make estimates and assumptions that affect the amounts reported in the Financial Statements and accompanying notes. Actual results may differ from those estimates, and such differences may be material to the Financial Statements.
### **Business Segments**
The Company operates one reportable segment, broker-dealer services, which offers financial planning, wealth management, IRA and 401(k) rollover, retail brokerage services relating to securities such as insurance and mutual fund products, stocks, options, and bonds.
### **Cash**
Cash is held at an affiliate of the Company, Wesbanco Bank, Inc. (the "Bank") and with the clearing agent, Pershing, LLC ("Pershing"), of which \$250,000 is restricted.
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### **Revenue Recognition**
The Company does not carry security accounts for customers, perform custodial functions relating to customer securities, or receive customer funds. All brokerage accounts are opened on a fully disclosed basis through the Company's clearing agent, Pershing. Other accounts are opened directly with an insurance and/or mutual fund company. Related revenues and expenses are recorded on a trade-date basis. The fees related to the transactions are recorded as revenue when the related service has been rendered and collectability is reasonably assured. The Company records as accounts receivable amounts earned for services rendered when payment has not been received and collectability is reasonably assured. A cancellation reserve totaling \$48,326 has been recorded as of December 31, 2021 to cover any commission cancellations or chargebacks occurring in 2022 for 2021 activity. This reserve is an estimate and has been calculated based on commission reversal probabilities and recent commission reversal activity. This reserve is located within other liabilities on the statement of financial condition.
# **Current Expected Credit Losses**
In September 2016, the F ASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326)," which required entities to use a new forward-looking "expected loss" model also referred to as the current expected credit loss model ("CECL") on trade and other receivables, held-tomaturity debt securities, loans and other instruments that generally results in the earlier recognition of allowances for credit losses. Entities are required to disclose significantly more information, including information used to track credit quality by year of origination for most financing receivables. In April 2019, the FASB issued ASU 2019-04, "Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging and Topic 825, Financial Instruments" and in May 2019 the FASB issued ASU 2019-05, "Financial Instruments - Credit Losses (Topic 326), Targeted Transition Relief. This ASU was effective for the Company for the fiscal year beginning January 1, 2020. The adoption of this accounting standard had no impact on the Company's financial statements, as all of the Company's trade receivables are shortterm and written off if deemed uncollectible after 120 days. All receivables are related to commissions owed to the Company by the carrier in which the investment contract was written. The creditworthiness of all carriers is documented on an ongoing quarterly basis by the Company and new business is only generated with carriers that have an investment grade rating by at least one of the major credit rating agencies. As such, the Company estimates current expected credit losses to be zero.
# **Fixed Assets**
Fixed assets are recorded at cost and depreciated over their estimated useful lives using the straight-line method. The principal estimated useful lives are three to seven years for furniture and equipment. Depreciation expense on furniture and equipment was \$825.
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### **Intangible Asset**
The Company recognized in 2009 an intangible asset in the amount of \$663,080 for acquired customer lists related to a brokerage office in the Columbus, Ohio market area. The customer lists have finite lives and are amortized on a sum-of-the-years-digits basis over 12 years. Amortization expense of the intangible asset was \$2,125 in 2021, at which point the intangible asset fully amortized.
### **Income Taxes**
The operating results of the Company are included in the consolidated federal income tax return filed by the Parent. The Company uses the liability method to account for deferred income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and law that will be in effect when the differences are expected to reverse. The amount of current tax expense or tax benefit is either remitted to or received from an affiliate on a periodic basis in conjunction with the payment of estimated federal and state income taxes on a corporationwide basis.
The Company did not have any uncertain tax positions at December 31, 2021. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits netted against income tax expense in the statement of operations. During the year, the Company did not accrue any interest or penalties.
# **3. Net Capital Requirement**
The Company is subject to the Securities and Exchange Commission ("SEC") Uniform Net Capital Rule ("Rule 15c3-1 ") and is required to maintain minimum net capital, as defined, equal to the greater of \$50,000, or 6.67% of aggregate indebtedness. At December 31, 2021, the Company had net capital of \$1,263,243, which was \$1,213,243 in excess of its required net capital of\$50,000.
# **4. Income Taxes**
The components of income tax expense for the year ended December 31, 2021, are as follows:
| | Current | | Deferred | | Total | |
|------------------|------------------------|----|-----------------|----|------------------|--|
| Federal
State | \$
33,939
77,595 | \$ | 12,863
1,006 | \$ | 46,802
78,601 | |
| Total | \$
111,534 | \$ | 13,869 | \$ | 125,403 | |
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A reconciliation between the effective income tax rate and the federal statutory income tax rate follows:
| Taxes at federal statutory rate | 21.0% |
|---------------------------------|-------|
| State income taxes | 2.9 |
| Other | 10.1 |
| Effective tax rate | 34.0% |
The Company has recorded net deferred tax assets of \$67,315 resulting from the timing of deductions for depreciation of fixed assets, stock options, restricted stock, and customer list intangibles. In evaluating its deferred tax assets, the Company has considered taxable income in prior periods, projected reversal of taxable temporary differences, tax planning strategies, and future taxable income. Based on these criteria, the Company has determined that it is not required to establish a valuation allowance for its deferred tax assets since management believes that the deferred tax assets are more likely than not to be realized in future periods.
The Company is subject to U.S. federal income tax as well as to tax in various state income tax jurisdictions. The Company is no longer subject to any income tax examinations for years prior to 2018.
### **5. Revenue Recognition**
Other revenue, which consists of interest income, is not in scope of ASC 606, *Revenue from Contracts with Customers.* For the revenue stream in scope of ASC 606, commission revenue, there are no significant judgments related to the amount and timing of revenue recognition.
Commissions revenue: Commission income is earned based on customer transactions and management of investments. The commission income from customers' transactions is recognized when the transaction is complete. The commission income from the management of investments is earned continuously over a quarterly period.
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| | Point of Revenue
Recognition | For the Year Ended
December 31, 2021 | |
|---------------------------------|---------------------------------|-----------------------------------------|-----------|
| Revenue Streams | | | |
| Commissions revenue | | | |
| Annuity commissions | At a point in time | \$ | 4,311,431 |
| Equity and debt security trades | At a point in time | | 570,262 |
| Managed money advisory fees | Overtime | | 1,201,474 |
| Trail commissions | Overtime | | 1,145,955 |
| Total commissions revenue | | \$ | 7,229,122 |
The following table summarizes the point of revenue recognition and the income recognized for the revenue streams for the year ended December 31, 2021 :
# **6. Related-Party Transactions**
Related-party transactions consisted of cash held at the Bank, taxes, commission expense, salaries and benefits expense, and stock compensation expense payable to the Bank. These expenses are calculated and recorded at the Company, and the Company utilizes the Bank to make the payments. Due to this arrangement, at December 31, 2021, the Company had net payables to the Bank for taxes of \$117,525, commission expense of\$235,257, salaries and benefits expense of\$123,874, other compensation expense of \$39,000, and other payables of \$31,736. The Company had cash on hand held at the Bank in a checking account totaling \$40,701 at December 31, 2021. All income tax and employee compensation-related payments are made by the Bank and are reimbursed to the Bank monthly by the Company.
The Parent and the Bank also provide management services to the Company. The costs of these services are reimbursed to each affiliate monthly by the Company and totaled \$541,781 for the year. Certain other expenses including rent, other occupancy-related expenses, professional fees and insurance are shared between the Company and the Bank and reimbursement occurs either monthly or at the time the invoice is received. The Company's employees participate in the pension plan and health reimbursement account sponsored by the Parent. Related expenses are not allocated to the Company and are not included in the statement of operations.
The Company also processes trades on behalf of some officers and directors (including their affiliates and families) of the Parent and its subsidiaries and has conducted transactions with those subsidiaries in the ordinary course of business. In addition, the Company earns commissions from W esMark Funds, a series of SEC registered mutual funds that are managed by the Bank as investment advisor. For the year ended December 31, 2021, the Company recorded \$38,440 of commissions from WesMark Funds, which is included in the statement of operations.
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# **7. Financial Guarantee**
The Company has agreed to indemnify the clearing broker, Pershing, for losses that it may sustain from customer accounts introduced by the Company. As of December 31, 2021, there were no amounts identified related to such agreement. The Company also maintains a clearing deposit with Pershing, which can be used to offset liabilities arising from the indemnification financial guarantee. At December 31, 2021, the cash held in two Pershing accounts consisted of nonrestricted funds totaling \$1,566,118 and the clearing deposit of \$250,000 for a total of \$1,816,118.
# **8. Subsequent Events**
The Company performed a review of events subsequent to the balance sheet date through the date that the Financial Statements were issued and determined that there were no such events requiring recognition or disclosure in the Financial Statements.
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Supplemental Information Required by Rule 17a-5 of the Securities and Exchange Commission
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# Schedule I Computation of Net Capital Under SEC Rule 15c3-1
#### December 31, 2021
| Computation of net capital: | |
|----------------------------------------------------------------------------------------------------------------------------------------------------|-----------------|
| Total shareholder's equity | \$
1,963,507 |
| Deductions and/or charges: | |
| Nonallowable assets: | |
| Cash | |
| Prepaid expenses | 76,193 |
| Fixed assets (net ofaccl.ll11u1ated depreciation of\$54,064) | 17,610 |
| Connnission receivables (1) | 499,837 |
| Deferred tax assets | 67,315 |
| Other assets | 39,309 |
| Total deductions and/or charges | 700,264 |
| Net capital | \$
1,263,243 |
| Aggregate indebtedness:
Items included in statement of financial condition:
Accounts payable to affiliate, connnission payable to affiliate, | |
| and other liabilities | \$
622,823 |
| Total aggregate indebtedness | \$
622,823 |
| Computation of basic net capital requirement: | |
| Miniml.ll11 net capital required | \$
50,000 |
| Excess net capital | \$
1,213,243 |
| Ratio: Aggregate indebtedness to net capital | 0.49 to 1 |
There were no material differences between the audited computation of net capital included in this report and the corresponding schedule included in the Company's amended December 31, 2021 Part IIA FOCUS filing on March 30, 2022.
(1) Nonallowable commission receivables include receivables aged over 30 days, fixed annuities and insurance contracts.
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# Schedule II Wesbanco Securities, Inc. Statement Pursuant to SEC Rule 17a-5(d) Computation for Determination of Reserve Requirements December 31, 2021
As Wesbanco Securities, Inc.' s business activities do not involve taking possession of customers' funds or securities, the Company is exempt from the computation of reserve requirements under paragraph (k)(2)(ii) of Rule 15c3-3 of the Securities Exchange Act of 1934.
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# Schedule III Wesbanco Securities, Inc. Statement Pursuant to SEC Rule 17a-5(d) Information Relating to Possession or Control of Securities December 31, 2021
As Wesbanco Securities, Inc.' s business activities do not involve taking possession of customers' funds or securities, the Company is exempt from the possession or control requirements under paragraph (k)(2)(ii) of Rule 15c3-3 of the Securities Exchange Act of 1934.
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# Statement of Financial Condition
**WesBanco Securities, Inc.** (A Wholly Owned Subsidiary of WesBanco, Inc.) December 31, 2021 With Report of Independent Registered Public Accounting Firm
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#### STATEMENT OF FINANCIAL CONDITION
Wesbanco Securities, Inc. (A Wholly-Owned Subsidiary of Wesbanco, Inc.) December 31, 2021 With Report of Independent Registered Public Accounting Firm
{21}------------------------------------------------
# Statement of Financial Condition
December 31, 2021
# **Contents**
| Report oflndependent Registered Public Accounting Firm l | |
|-----------------------------------------------------------|--|
| Statement of Financial Condition 2 | |
| Notes to Statement of Financial Condition .3 | |
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2100 One PPG Place Fax: +1412 644 0477 Pittsburgh, PA 15222 ey.com
Ernst & Young LLP Tel: +1412 644 7800
# **Report of Independent Registered Public Accounting** Firm
To the Shareholders and the Board of Directors of Wesbanco Securities, Inc.
### **Opinion on the Financial Statement**
We have audited the accompanying statement of financial condition of Wesbanco Securities, Inc. (the Company) as of December 31, 2021 and the related notes (the "financial statement''). In our opinion, the financial statement presents fairly, in all material respects, the financial position of the Company at December 31, 2021, in conformity with U.S. generally accepted accounting principles.
#### **Basis** for Opinion
This financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's 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 financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
We have served as the Company's auditor since 1999. March 30, 2022
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# Statement of Financial Condition
#### December 31, 2021
#### **Assets**
| Cash (restricted \$250,000) | \$
1,872,258 |
|------------------------------------------------------------|-----------------|
| C01rnnission receivables | 513,645 |
| Deferred tax assets | 67,315 |
| Prepaid expenses | 76,193 |
| Fixed assets (net of accwnuJated depreciation of \$54,064) | 17,610 |
| Other assets | 39,309 |
| Total assets | \$
2,586,330 |
| Liabilities and shareholders' equity | |
| Liabilities: | |
| AccoW1ts payable to affiliate | \$
312,135 |
| Corrnnission payable to affiliate | 235,257 |
| Other liabilities | 75,431 |
| Total liabilities | 622,823 |
| Shareholders' equity: | |
| Connnon stock, par value \$1 per share -
authorized 500 | |
| shares, issued and outstanding 100 shares | 100 |
| Additional paid-in capital | 1,775,533 |
| Retained earnings | 187,874 |
| Total shareholders' equity | 1,963,507 |
| Total liabilities and shareholders' equity | \$
2,586,330 |
*See Notes to Statement of Financial Condition.*
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# Notes to Statement of Financial Condition
December 31, 2021
# **1. Organization**
Wesbanco Securities, Inc. (the "Company") is a wholly-owned subsidiary of Wesbanco, Inc. (the "Parent"). The Company is registered as a broker/dealer under the Securities and Exchange Act of 1934 and is a member of Financial Industry Regulatory Authority, Inc. ("FINRA") and Securities Investors Protection Association ("SIPC").
The Company offers financial planning, wealth management, individual retirement account ("IRA") and 401(k) rollover, retail brokerage services relating to securities such as insurance and mutual fund products, stocks, options, and bonds on a fully disclosed basis. The Company also operates as a registered investment advisor.
# **2. Significant Accounting Policies**
# **Basis of Presentation**
The Financial Statement includes the accounts of the Company. The statement has been prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). In preparing the Financial Statement, management is required to make estimates and assumptions that affect the amounts reported in the Financial Statement and accompanying notes. Actual results may differ from those estimates, and such differences may be material to the Financial Statement.
# **Cash**
Cash is held at an affiliate of the Company, Wesbanco Bank, Inc. (the "Bank") and with the clearing agent, Pershing, LLC ("Pershing"), of which \$250,000 is restricted.
# **Commission Receivables**
The Company does not carry security accounts for customers, perform custodial functions relating to customer securities, or receive customer funds. All brokerage accounts are opened on a fully disclosed basis through Pershing. Other accounts are opened directly with an insurance and/or mutual fund company. The Company records as accounts receivable amounts earned for services rendered when payment has not been received and collectability is reasonably assured. A cancellation reserve totaling \$48,326 has been recorded as of December 31, 2021 to cover any commission cancellations or chargebacks occurring in 2022 for 2021 activity. This reserve is an estimate and has been calculated based on commission reversal probabilities and recent commission reversal activity. This reserve is located within other liabilities on the statement of financial condition.
{25}------------------------------------------------
# **Current Expected Credit Losses**
In September 2016, the F ASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326)," which required entities to use a new forward-looking "expected loss" model also referred to as the current expected credit loss model ("CECL") on trade and other receivables, held-tomaturity debt securities, loans and other instruments that generally results in the earlier recognition of allowances for credit losses. Entities are required to disclose significantly more information, including information used to track credit quality by year of origination for most financing receivables. In April 2019, the FASB issued ASU 2019-04, "Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging and Topic 825, Financial Instruments" and in May 2019 the FASB issued ASU 2019-05, "Financial Instruments - Credit Losses (Topic 326), Targeted Transition Relief. This ASU was effective for the Company for the fiscal year beginning January 1, 2020. The adoption of this accounting standard had no impact on the Company's financial statements, as all of the Company's trade receivables are shortterm and written off if deemed uncollectible after 120 days. All receivables are related to commissions owed to the Company by the carrier in which the investment contract was written. The creditworthiness of all carriers is documented on an ongoing quarterly basis by the Company and new business is only generated with carriers that have an investment grade rating by at least one of the major credit rating agencies. As such, the Company estimates current expected credit losses to be zero.
# **Fixed Assets**
Fixed assets are recorded at cost and depreciated over their estimated useful lives using the straight-line method. The principal estimated useful lives are three to seven years for furniture and equipment.
# **Intangible Asset**
The Company recognized in 2009 an intangible asset in the amount of \$663,080 for acquired customer lists related to a brokerage office in the Columbus, Ohio market area. The customer lists have finite lives and are amortized on a sum-of-the-years-digits basis over 12 years. The intangible asset was fully amortized in 2021.
# **Income Taxes**
The operating results of the Company are included in the consolidated federal income tax return filed by the Parent. The Company uses the liability method to account for deferred income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and law that will be in effect. when the differences are expected to reverse. The amount of current tax expense or tax benefit is either remitted to or received from an affiliate on a periodic basis in conjunction with the payment of estimated federal and state income taxes on a corporationwide basis. The Company did not have any uncertain tax positions at December 31, 2021.
{26}------------------------------------------------
# **3. Net Capital Requirement**
The Company is subject to the Securities and Exchange Commission ("SEC") Uniform Net Capital Rule ("Rule l 5c3-l ") and is required to maintain minimum net capital, as defined, equal to the greater of \$50,000, or 6.67% of aggregate indebtedness. At December 31, 2021, the Company had net capital of\$1,263,243, which was \$1,213,243 in excess of its required net capital of \$50,000.
# **4. Income Taxes**
The Company has recorded a net deferred tax asset of \$67,315 resulting from the timing of deductions for depreciation of fixed assets and customer list intangibles. In evaluating its deferred tax assets, the Company has considered taxable income in prior periods, projected reversal of taxable temporary differences, tax planning strategies, and future taxable income. Based on these criteria, the Company has determined that it is not required to establish a valuation allowance for its deferred tax assets since management believes that the deferred tax assets are more likely than not to be realized in future periods.
The Company is subject to U.S. federal income tax as well as to tax in various state income tax jurisdictions. The Company is no longer subject to any income tax examinations for years prior to 2018.
# **5. Related-Party Transactions**
Related-party transactions consisted of cash held at the Bank, and taxes, bonus payable, commission payable, salaries and benefits payable, and stock compensation payable to the Bank. These transactions are calculated and recorded at the Company, and the Company utilizes the Bank to make the payments. Due to this arrangement, at December 31, 2021, the Company had net payables to the Bank for taxes of \$117,525, commissions of \$235,257, salaries and benefits of \$123,874, other compensation of\$39,000 and other payables totaling \$31,736. The Company had cash on hand held at the Bank in a checking account totaling \$40,701 at December 31, 2021. All tax and employee compensation related payments are made by the Bank and are reimbursed to the Bank monthly by the Company.
The Company also processes trades on behalf of some officers and directors (including their affiliates and families) of the Parent and its subsidiaries and has conducted transactions with those subsidiaries in the ordinary course of business. In addition, the Company earns commissions from W esMark Funds, a series of SEC registered mutual funds that are managed by the Bank as investment advisor.
# **6. Financial Guarantee**
The Company has agreed to indemnify the clearing broker, Pershing, for losses that it may sustain from customer accounts introduced by the Company. As of December 31, 2021, there were no amounts identified related to such agreement. The Company also maintains a clearing deposit with Pershing, which can be used to offset liabilities arising from the indemnification financial
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guarantee. At December 31, 2021, the cash held in two Pershing accounts consisted of nonrestricted funds totaling \$1,566,118 and the clearing deposit of\$250,000 for a total of\$1,816,118.
# **7. Subsequent Events**
The Company performed a review of events subsequent to the balance sheet date through the date that the Financial Statement was issued and determined that there were no such events requiring recognition or disclosure in the Financial Statement.
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Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.