# FARMERS FINANCIAL SOLUTIONS, LLC X-17A-5 (2019-02-27) — Broker-dealer annual report - Company: FARMERS FINANCIAL SOLUTIONS, LLC - Form: X-17A-5 - Filed: 2019-02-27 - Period: 2018-12-31 - Accession: 0001106728-19-000001 - CIK: 1106728 - File #: 8-52361 - Material weakness: No - Auditor: Moss Adams, LLP - Auditor location: Seattle, WA - Contact: Joshua Borkin - Phone: 818-584-0258 - Signed by: Joshua Borkin (Chief Financial Officer) Original filing: https://www.sec.gov/Archives/edgar/data/1106728/000110672819000001/FFS_SFC_2018_2.pdf --- {0}------------------------------------------------ # **Farmers Financial Solutions, LLC** (A wholly owned subsidiary of FFS Holding, LLC) Statement of Financial Condition December 31, 2018 {1}------------------------------------------------ **UNITED STATES SECURlTIESANDEXCHANGECOMMISSION Washington, D.C. 20549** 0MB APPROVAL 0MB Number: 3235-0123 Expires: August 31, 2020 Estimated average burden hours per response ... . .. 12.00 SEC FILE NUMBER 8-52361 # **ANNUAL AUDITED REPORT FORM X-17 A-5 PARTIII** **FACING PAGE** **Information Required of Brokers and Dealers Pursuant to Section 17** of the **Securities Exchange Act of 1934 and Rule 17 a-5 Thereunder** | REPORT FOR THE PERIOD BEGINNING O 1/01 /18 | | | -----
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MM/DD/YY | | | | | | | A. REGISTRANT IDENTIFICATION | | | | | NAME OF BROKER-DEALER: FARMERS FINANCIAL SOLUTIONS, LLC | | | | OFFICIAL USE ONLY | | | ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.) | | | | FIRM I.D. NO. | | | 31051 AGOURA ROAD | | | | | | | | | (No. and Street) | | | | | WESTLAKE VILLAGE | | CA | | 91361 | | | (City) | | (Sta te) | | (Zip Code) | | | NAME AND TELEPHONE NUMBER OF PERSON TO CONTACT IN REGARD TO THlS REPORT
JOSHUA BORKIN | | | | (818) 584-0258 | | | | | | | (Area Code - Telephone Number) | | | | | B. ACCOUNTANT IDENTIFICATION | | | | | INDEPENDENT PUBLIC ACCOUNTANT whose opinion is contained in this Report* | | | | | | | MOSS ADAMS, LLP | | | | | | | | | (Name - if i11divid11a/, stale last, first, middle name) | | | | | 999 THIRD AVE, SUITE 2800 SEATTLE | | | WA | 98104 | | | (Address) | | (City) | (State) | (Zip Code) | | | CHECK ONE: | | | | | | | I/' I
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Certified Public Accountant
Public Accountant | | | | | | | Accountant not resident in United States or any of its possessions. | | | | | | | | | FOR OFFICIAL USE ONLY | | | | | | | | | | | | | | | | | | | | | | | | | *\*Claims for exemption from the requirement that the annual report be covered by the opinion of an independent public accountant must be supported by a statement of facts and circumstances relied on as the basis for the exemption. See Section 240. 17a-5(e)(2)* > **Potential persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid 0MB control number.** SEC 1410 (11-05) {2}------------------------------------------------ ## **OATH OR AFFIRMATION** | I, _J_O_S_H_U_A_ B_O_R_K_I_N _____
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___ , swear ( or affirm) that, to the best of
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FARMERS FINANCIAL SOLUTIONS, LLC | my knowledge and belief the accompanying financial statement and supporting schedules pertaining to the firm of
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are true and correct. I further swear (or affirm) that | | classified solely as that of a customer, except as follows: | neither the company nor any partner, proprietor, principal officer or director has any proprietary interest in any account | | | ~
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gnatu1·e | | | CHIEF FINANCIAL OFFICER | | | Title | | Notary Public
This report ** contains (check all applicable boxes):
Er (a) Facing Page.
12:1' (b) Statement of Financial Condition.
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of Comprehensive Income (as define? m .§210, l'
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( d) Statement of Changes in Financfal C~~-~iti8n
(e) Statement of Changes in Stockh~ldei"s
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(f) Statement of Changes in Liabiliti~s.,~~~oi·4~ry~(ia to Claims of Creditors.
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(g) Computation of Net Capital.
' (h) Computation for Determination of Reserve Requirements Pursuant to Rule 15c3-3.
(i) Information Relating to the Possession or Control Requirements Under Rule l 5c3-3.
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consolidation.
(I) An Oath or Affirmation.
(rn) A copy of the SIPC Supplemental Report. | D (c) Statement oflncome (Loss) or, i{-111'&¢' is other comprehensive income in the period(s) presented, a Statement
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e.02 of Regulation S-X).
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~t Pattners' or Sole Proprietors' Capital.
U) A Reconciliation, including appropriate explanation of the Computation ofNet Capital Under Rule 15c3-l and the
Computation for Determination of the Reserve Requirements Under Exhibit A of Rule l 5c3-3.
0 (k) A Reconciliation between the audited and unaudited Statements of Financial Condition with respect to methods of
D (n) A repo1t describing any material inadequacies found to exist or found to have existed since the date of the previous audit. | | | ** For conditions of confidential treatment of certain portions of this filing, see section 240. l 7a-5(e)(3). | {3}------------------------------------------------ | | ACKNOWLEDGMENT | |---------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | | A notary public or other officer completing this
certificate verifies only the identity of the individual
who signed the document to which this certificate is
attached, and not the truthfulness, accuracy, or
validity of that document. | | | State of California
Los Angeles
County of | | | on
February 26, 2019
before me, Gerson Ismael Orozco, Notary Public
(insert name and title of the officer) | | | _____
personally appeared _-_--_-_--_-_--_--_-_--_-_--_-_--_J_o_s_h_u_a_A_la_n_B_o_r_ki_n_-_--_-_--_-_--_-_--_--_-_--_-_--
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who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the
person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. | | ~·~/·~· ., "
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T"1· tx~rt•,u: t4·J&nl | | | (Seal) | | | | {4}------------------------------------------------ ## **Farmers Financial Solutions, LLC** **(A wholly owned subsidiary of FFS Holding, LLC) Index December 31, 2018** | | Page(s) | |------------------------------------------------------------------|---------| | Report of Independent Registered Public Accounting Firm 1 | | | Financial Statements | | | Statement of Financial Condition
2 | | | Notes to Financial Statement 3-6 | | {5}------------------------------------------------ ![](_page_5_Picture_0.jpeg) # **Report of Independent Registered Public Accounting Firm** To the Member and the Board of Directors Farmers Financial Solutions, LLC ## *Opinion* **on** *the Financial Statement* We have audited the accompanying statement of financial condition of Farmers Financial Solutions, LLC (the Company) as of December 31, 2018 that is filed pursuant to Rule 1 ?a-5 under the Securities Exchange Act of 1934, 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 as of December 31, 2018, 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 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 to 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 provides a reasonable basis for our opinion. m~~LL.;Cl Scottsdale, Arizona February 25, 2018 We have served as the Company's auditor since 2017. {6}------------------------------------------------ ## **Farmers Financial Solutions, LLC (A wholly owned subsidiary of FFS Holding, LLC) Statement of Financial Condition** **December 31 , 2018** | Assets | | |---------------------------------------|------------------| | Cash and cash equivalents | \$
11,292,809 | | Commissions and fees receivable | 2,542,266 | | Total assets | \$
13,835,075 | | | | | Liabilities and Member's Equity | | | Liabilities | | | Commissions and fees payable | \$
1,811,667 | | Payable to FFS Holding, LLC | 1,434,962 | | Total liabilities | 3,246,629 | | Member's equity | | | Total member's equity | 10,588,446 | | Total liabilities and member's equity | \$
13,835,075 | The accompanying notes are an integral part of this financial statement. {7}------------------------------------------------ #### **1. Organization** #### **Background** Farmers Financial Solutions, LLC (the "Company"), a Nevada limited liability company formed on December 21, 1999, is a wholly owned subsidiary of FFS Holding, LLC (the "Parent"). The Parent, in turn, is a wholly owned subsidiary of Mid-Century Insurance Company ("Mid-Century"), which is wholly owned by the Farmers Property and Casualty Companies (the "Farmers P&C Companies"). The Farmers P&C Companies are comprised of Farmers Insurance Exchange ("FIE"), Fire Insurance Exchange ("Fire"), Truck Insurance Exchange ('Truck"), and their respective insurance subsidiaries. The Farmers P&C Companies' policies are marketed through its contracted agency force utilizing its trade name and logo, Farmers Insurance Group of Companies®. Farmers Group, Inc. ("FGI") is an insurance holding company that provides management. services, either directly or indirectly through wholly owned subsidiaries, as attorney-in-fact for certain members of the Farmers P&C Companies. The members of the Farmers P&C Companies are not owned in whole or in part by FGI. FGI is owned by Zurich Insurance Group ("Zurich"}, a Swiss company headquartered in Zurich. #### **Nature of Operations** The Company functions as the broker-dealer for the contracted agency force shared by Farmers New World Life ("Farmers Life"), a wholly owned subsidiary of FGI, and the Farmers P&C Companies. The Company acts as a distributor of the Farmers Life variable annuity and life insurance contracts and offers fixed and index annuities, and variable life insurance contracts issued primarily by AXA, Athene, AIG, and Farmers Life as a broker-dealer and insurance agency. The Company also offers mutual funds and 529 savings plans sponsored by various non-affiliates. The Company is a registered broker-dealer with the Securities and Exchange Commission ("SEC") under the Securities Exchange Act of 1934 and a member of the Financial Industry Regulatory Authority ("FINRA"). FINRA is the Company's designated self-regulatory organization. In the normal course of business, the Company's customer activities involve the introduction or transmittal of customers' applications and funds to product sponsors for execution and settlement. The Company does not hold or maintain funds or securities, nor provide clearing services for customers or other broker-dealer(s). As a result, the Company claims exemption from SEC Rule 15c3-3 under the provisions of paragraph k(2)(i) for the fiscal year ended December 31, 2018 and k(2)(ii) for the period beginning January 1, 2018 through September 30, 2018. #### **2. Summary of Significant Accounting Policies** #### **Basis of Presentation** The accompanying financial statement of the Company have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"). {8}------------------------------------------------ ## **2. Summary of Significant Accounting Policies (Continued)** #### **Use of Estimates** The preparation of the accompanying financial statement in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statement and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. #### **Cash and Cash Equivalents** Cash equivalents consist of funds invested in money market accounts and in other investments with original maturities not exceeding three months. The Company maintains its cash and cash equivalents primarily with one high credit quality financial institution. At times, cash balances may exceed the FDIC insurance limits. At December 31, 2018, an amount of \$7,995,100 was invested in the Blackrock Liquidity TempFund Institutional Money Market Fund. These funds are available to the Company on demand. This investment is carried at its net asset value, and is classified as a "Level 1" investment, and defined below. #### **Fair Value of Financial Assets and Financial Liabilities** The carrying value of cash and cash equivalents, receivables and payables approximate their fair value as a result of the short term nature of these balances. In accordance with the authoritative guidance on fair value measurements and disclosures, the Company discloses the fair value of its investment in a hierarchy that prioritizes the inputs to valuation techniques used to measure the fair value. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements). The guidance establishes three levels of the fair value hierarchy as follows: - Level 1 Inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities. - Level 2 Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly, including inputs in markets that are not considered to be active. - Level 3 Inputs that are derived from valuation techniques in which one or more inputs is unobservable. As of December 31 , 2018, there were no fair value measurements using Level 2 or Level 3 inputs. | | Level 1 | | Level2 | | Level3 | | Total 12/31/2018 | | |--------------------|---------|-----------|--------|--|--------|--|------------------|-----------| | Money Market Funds | \$ | 7,995,100 | \$ | | \$ | | \$ | 7,995,100 | {9}------------------------------------------------ ## **2. Summary of Significant Accounting Policies (Continued)** ## **Contract Balances** The timing of the Company's revenue recognition may differ from the timing of payment by the Company's customers. The Company records a receivable when revenue is recognized prior to payment and have an unconditional right to payment. The Company had receivables related to revenues from contracts with customers of \$2,542,266 and \$2,417,962 at December 31, 2018 and January 1, 2018, respectively. ## **Income Taxes** The Company is a single member limited liability company, which is treated as a disregarded entity for federal income tax purposes. As a result, the Company is effectively treated as a division of the Parent for federal income tax purposes. For the year ended December 31, 2018, the Company has provided for income taxes as if it were a stand-alone taxpayer. However, because the Company is not required to settle any tax liability, benefit or credit resulting from its separate tax position with the Parent, all tax liabilities or recoverables accrued by the Company are deemed settled by way of a capital contribution or capital distribution by or to the Parent. For the year ended December 31 , 2018, the Company recorded a capital contribution in the amount of \$426,920 related to the settlement of the current year tax provision. There were no deferred tax assets or liabilities as of December 31 , 2018. There was no state income tax as the Company is owned by an insurance company which generally does not pay state income taxes. The Company believes that, as of December 31 , 2018, it had no material uncertain tax position. #### **Recently Adopted Accounting Pronouncements** In May 2014, Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers: Topic 606, to supersede nearly all existing revenue recognition guidance under GAAP. ASU 2014-09 also requires new qualitative and quantitative disclosures, including disaggregation of revenues and descriptions of performance obligations. The Company adopted the provisions of this guidance on January 1, 2018 using the modified retrospective approach. The Company has performed an assessment of its revenue and has not identified any material changes to the timing or amount of its revenue recognition under ASU 2014-09. The Company's accounting policies did not change materially as a result of applying the principles of revenue recognition from ASU 2014- 09 and are largely consistent with existing guidance and current practices applied by the Company. The adoption of ASU 2014-09 did not have an impact on the Company's opening retained earnings as of January 1, 2018. #### **3. Transactions with Affiliates and FGI** The Company has entered into an Administrative Service and Expense Sharing Agreement (the "Agreement") with the Parent dated November 27, 2003. The Company reimburses the Parent for costs incurred by the Parent to provide management and administrative services. Total expenses charged to the Company were \$11,067,494 for the year ended December 31, 2018. At December 31, 2018, the Company had accounts payable with the Parent in the amount of \$1,434,962. {10}------------------------------------------------ ## **3. Transactions with Affiliates and FGI (Continued)** The employees of the Parent assigned to the Company are covered under benefit plans sponsored by FGI. All the compensation and benefit related expenses are allocated to the Company by the Parent. The Company has entered into a sales agreement with Farmers Life to act as distributors for the sale of variable annuity and variable life insurance contracts issued by Farmers Life. Commission revenue from Farmers Life variable annuity and life insurance contracts totaled \$14,392,221 for the year ended December 31, 2018. Receivables from Farmers Life as of December 31 , 2018 were \$807,911 . ## **4. Net Capital Requirements** Under Rule 15c3-1 of the Securities Exchange Act of 1934 (the "Rule"), the Company is required to maintain a minimum net capital amount. The Company has elected to use the alternative method, permitted by the Rule, which requires that the Company maintain minimum net capital, as defined equal to the greater of \$250,000 or 2% of aggregate debit balances arising from customers' transactions, as defined. As the Company does not have aggregate debit balances arising from customers' transactions, the Company's minimum net capital requirement is \$250,000. At December 31, 2018, the Company had net capital of \$9,633,682 which was \$9,383,682 in excess of the amount required. The Company claims exemption from the provisions of Rule 15c3-3 pursuant to paragraph k(2)(i) for the fiscal year ended December 31 , 2018 and k(2)(ii) for the period beginning January 1, 2018 through September 30, 2018, under the Securities Exchange Act of 1934 as a broker or dealer who carries no customer accounts, promptly transmits all customer funds and delivers all securities received in connection with its activities as a broker or dealer, and does not otherwise hold funds or securities for, or owe money or securities to, customers. Operating under such exemption, the Company has not prepared a Determination of Reserve Requirements for Brokers or Dealers. Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.