8. Investment In and Advances to Affiliates:

9 Months Ended

Sep. 30, 2013

Notes to Financial Statements

8. Investment In and Advances to Affiliates:

Siebert, Brandford, Shank & Co., L.L.C. (“SBS”)

Siebert holds a 49% ownership interest in SBS which is engaged in municipal bond underwritings (see note 14). Income or loss from SBS is considered to be integral to Siebert’s operations and material to its results of operations.

Summarized financial data of SBS is set forth below.

	September 30,
	2013			2012
Total assets including secured demand note of $1,200,000 due from Siebert		20,897,000
Total liabilities including subordinated liabilities of $1,200,000 due to Siebert		5,554,000
Total members’ capital		15,343,000
Regulatory minimum net capital requirement		250,000
Nine months ended:
Total revenues		16,991,000			20,785,000
Net (loss) income		(380,000	)		1,812,000
Three months ended:
Total revenues		7,962,000			6,731,000
Net income		1,562,000			380,000

Siebert charged SBS $75,000 and $56,000 for each of the nine months ended September 30, 2013 and 2012, and $25,000 and $18,000 for each of the three months ended September 30, 2013 and 2012, respectively, for general and administrative services, which Siebert believes approximates the cost of furnishing such services.

Siebert’s share of net income (loss) for the three months ended September 30, 2013 and 2012 amounted to $765,000 and 186,000, respectively, and for the nine months ended September 30, 2013 and 2012 amounted to ($186,000) and $888,000, respectively.

Siebert received distributions from SBS of $1,212,000 during the nine months ended September 30, 2013, and Siebert’s share of undistributed earnings from SBS amounted to $7,126,000 at September 30, 2013. Such amount may not be immediately available for distribution to Siebert for various reasons including the amount of SBS’s available cash, the provisions of the agreement among Siebert and the principals of SBS and SBS’s continued compliance with its regulatory and net capital requirements.

SBS Financial Products Company, LLC (“SBSFPC”)

The Company has a 33.33% ownership interest in, and the two individual principals of SBS have an aggregate 66.66% ownership interest in, SBSFPC which engages in derivatives transactions related to the municipal underwriting business (see note 14). Income and loss from SBSFPC is considered to be integral to the Company’s operations and material to the results of operations.

Summarized financial data of SBSFPC is set forth below.

	September 30,
	2013			2012
Total assets		16,694,000
Total liabilities		16,077,000
Total members’ capital		617,000
Nine months ended:
Total revenues		(226,000	)*		277,000
Net (loss) income		(430,000	)		126,000
Three months ended:
Total revenues		(18,000	)*		226,000
Net (loss) income		(70,000	)		174,000
*Negative balance was attributable to unrealized loss on derivative contracts.

The Company’s share of net income (loss) of SBSFPC for the three months ended September 30, 2013 and 2012 amounted to ($23,000) and $58,000, respectively. The Company’s share of net income (loss) of SBSFPC for the nine months ended September 30, 2013 and 2012 amounted to ($143,000) and $42,000, respectively.

At September 30, 2013, SBSFPC had cumulative distributions in excess of cumulative earnings in the amount of $583,000 of which the Company’s share was $194,000. The Company received distributions from SBSFPC of $6,000 during the nine months ended September 30, 2013 which is shown on the statement of cash flows as an investing activity as it represents a return of capital.

In July 2013, as a result of the filing of a bankruptcy petition by the City of Detroit, SBSFPC unwound certain derivative contracts with a financial institution pursuant to the terms of the contracts. The contracts were recorded as liabilities with a carrying value of $123,063,000. In connection therewith, SBSFPC assigned certain derivative contracts with the City of Detroit to the financial institution, which were recorded as assets with a carrying value of $123,063,000. No gain or loss was recognized by SBSFPC as a result of the unwinding and assignment of these derivative contracts and SBSFPC has no continuing obligations or rights with respect to the derivative contracts. During the quarter ended March 31, 2013, SBSFPC incurred a loss of $241,000 on the write-down in value of the derivative contracts with the City of Detroit to adjust their carrying value to the carrying value of the derivative contracts with the financial institution.