# PENTEGRA DISTRIBUTORS INC. X-17A-5 (2021-03-01) — Broker-dealer annual report - Company: PENTEGRA DISTRIBUTORS INC. - Form: X-17A-5 - Filed: 2021-03-01 - Period: 2020-12-31 - Accession: 0000861941-21-000001 - CIK: 861941 - File #: 8-42445 - Material weakness: No - Auditor: Berry Dunn McNeil & Parker LLC - Auditor location: Portland, ME - Contact: Lars G. Ernst - Phone: 914-821-9554 - Signed by: Lars G. Ernst (VP, CCO) Original filing: https://www.sec.gov/Archives/edgar/data/861941/000086194121000001/PDI2020FS1.pdf --- {0}------------------------------------------------ Financial Statements and Supplementary Schedules Pursuant to Rule 17 a-5 of the Securities Exchange Act of 1934 As of and for the year ended December 3 1, 2020 {1}------------------------------------------------ Financial Statements and Supplementary Schedules As of and for the year ended December 31, 2020 ### **Contents** | Facing Page and Oath or Affirmation | |-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | Report of Independent Registered Public Accounting Firm l | | Financial Statements: | | Statement of Financial Condition 2
Statement of Income 3
Statement of Changes in Shareholder's Equity 4
Statement of Cash Flows 5
Notes to Financial Statements 6-8 | | Supplementary Schedules: | | CompLJtotion of Net Capitol Under RLJle l 5c3-l of the SecLJrities ond
SchedLJle:
Exchange Commission 9
Determination of Reserve Requirements and Information Relating to
Schedule:
II
Possession or Control Requirements Under Rule l 5c3-3 of the
Securities and Exchange Commission 1 O | | Report of Independent Registered Public Accounting Firm -
Exemption Review
Report 11 | | Report of Exemption from Rule l 5c3-3 12 | {2}------------------------------------------------ **UNITED STATES SECURJTJESAND EXCHANGE COMMISSION Washington, D.C. 20549** #### 0MB APPROVAL 0MB Number: 3235-0123 Expires: October 31, 2023 Estimated average burden hours oer response ... ... 12.00 # **ANNUAL AUDITED REPORT FORM X-17A-5 PARTIII** | SEC FILE NUMBER | |-----------------| | 8,42445 | **FACING PAGE** Information **Required** of **Brokers** and **Dealers Pursuant to Section** 17 **of the Securities Exchange Act of 1934 and Rule 17a-S Thereunder** | MM/00/YY
A. REGISTRANT IDENTIFICATION
F BROKER-DEALER: Pentegra Distributors, Inc.
ADDRESS OF PRINCIPAL PLACE OF BUSINESS: (Do not use P.O. Box No.)
(No. and Street)
NY | AND ENDING 12/31/2020 | MM/DD/YY
FIRM !.D. NO. | |-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------|-----------------------------------------------------------------------------------------------------------------------------------------| | | | | | | | OFFICIAL USE ONLY | | | | | | | | | | | | | | | | | | | | 10604 | | (State) | (Zip Code) | | | | | | | | | (Area Code - Telephone Number) | | B. ACCOUNTANT IDENTIFICATION | | | | INDEPENDENT PUBLIC ACCOUNTANT whose opinion is contained in this Report* | | | | | | 04101 | | | (Stale) | (Zip Code) | | Accountant not resident in United States or any of its possessions.
FOR OFFICIAL USE ONLY | | | | | Portland | NAME AND TELEPHONE NUMBER OF PERSON TO CONTACT IN REGARD TO THIS REPORT
(Name - if individual. state last. first, middle name)
ME | *\*Claims for exemptio11 from the req11ireme11t that the a111111al report be covered by the opinion of an i11depe11de11t public accoumant 11111st be supported by a statement of facts and circumstances relied* 011 *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. {3}------------------------------------------------ #### **OATH OR AFFIRMATION** | -----=-----------------------------
Pentegra Distributors, Inc. | my knowledge and belief the accompanying financial statement and supporting schedules pertaining to the firm of | |------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------| | of December 31 | ------------
-
, as
2020
are true and correct. J 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 | | ~
-
Colleen M. zanicchi
Notary Public State of New York
No. 01 FA6024454
Qualified in Westchester County
commission Expires 05/10/ :;,J, | ~8-~
Signature
ve
c.L-0
I
Title | - 0 (a) Facing Page. - [Z] (b) Statement of Financial Condition. - [Z] (c) Statement oflncome (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 Changes in Financial Condition. - 0 (e) Statement of Changes in Stockholders' Equity or Partners' or Sole Proprietors' Capital. - 0 (f) Statement of Changes in Liabilities Subordinated to Claims of Creditors. - § (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 I 5c3-3. - 0 (j) A Reconciliation, including appropriate explanation of the Computation of Net Capital Under Rule l 5c3-I and the Computation for Determination of the Reserve Requirements Under Exhibit A of Rule I 5c3-3. - 0 (k) A Reconciliation between the audited and unaudited Statements of Financial Condition with respect to methods of consolidation. - 0 (I) An Oath or Affirmation. - - D (m) A copy of the SIPC Supplemental Report. D (n) A report 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 240.17a-5(e){3).* {4}------------------------------------------------ ![](_page_4_Picture_0.jpeg) #### **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM** Board of Directors Pentegra Distributors, Inc. #### **Opinion on the Financial Statements** We have audited the accompanying statement of financial condition of Pentegra Distributors, Inc. (the Company) as of December 31 , 2020, the related statements of income, changes in shareholder's equity, and cash flows for the year then ended, and the related notes and schedules (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 as of December 31 , 2020, and the results of its operations and 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. #### **Auditor's Report on Supplemental Information** The supplemental information contained within Schedule I - Computation of Net Capital under Rule 15c3-1 of the Securities and Exchange Commission and Schedule II - Determination of Reserve Requirements and Information Relating to Possession or Control Requirements under Rule 15c3-3 of the Securities and Exchange Commission (Exemption) (the supplemental information) has been subjected to audit procedures performed in conjunction with the audit of the Company's financial statements. The supplemental information is the responsibility of the Company's management. Our audit procedures included determining whether the supplemental 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 presented in the supplemental information. In forming our opinion on the supplemental information, we evaluated whether the supplemental information, including its form and content, is presented in conformity with 17 C.F.R. §240.17a-5. In our opinion, the supplemental information is fairly stated, in all material respects, in relation to the financial statements as a whole. ~ flu.Mt t1)cfl4.i./ 1r-*~-(,vyJ~* LL(, We have served as the Company's auditor since 2007. Portland, Maine February 26, 2021 {5}------------------------------------------------ Pentegra Distributors, Inc. Statement of Financial Condition December 31, 2020 | \$
911,499 | |-----------------| | 96,728 | | 26,612 | | \$
1,034,839 | | | | | | \$ | | 25,351 | | 1,009,487 | | \$
1,034,839 | | | The accompanying notes are an integral part of these financial statements. {6}------------------------------------------------ Pentegra Distributors, Inc. Statement of Income Year Ended December 31, 2020 | Revenue: | | |----------------------------------|------------------| | Service income | \$
1,828,331 | | Expense
s: | | | Compensation and benefits | 187,244 | | Professional fees | 26,824 | | Regulatory fees | 36,235 | | Facilities | 29,670 | | Other | ,661
21 | | Total expenses | ,634
301 | | Income before income tax expense | 1,526,697 | | Income tax expense | 399,107 | | Net income | \$
l, 127,590 | The accompanying notes are an integral part of these financial statements. {7}------------------------------------------------ ## Pentegra Distributors, Inc. Statement of Changes in Shareholder's Equity Ye ar Ende d December 31, 2020 | | | | | | Additional | | | | Total | |------------------------------------|--------------|--------|--|---------|------------|----------|--------------|---------------|-----------| | | Common Stock | | | Paid-In | | Retained | | Shareholder's | | | | Shares | Amount | | Capital | | Earnings | | Equity | | | cembe
Balance, De
r 31, 2019 | 100 | \$ | | \$ | 25,351 | \$ | 831,897 | \$ | 857,249 | | nd to parent
Divide | | | | | | | (950,000) | | (950,000) | | Net income | | | | | | | 1,127,590 | | 1,127,590 | | Balance, Decembe
r 31, 2020 | 100 | \$ | | \$ | 25,351 | | \$ 1,009,487 | \$ | 1,034,839 | The accompanying notes a re an integral part of these fina ncial statements. {8}------------------------------------------------ | Pentegra Distributors, Inc. | | |-----------------------------|--| | | | Statement of Cash Flows Year Ended December 31, 2020 | Cash flows from operating activities
Net income | \$
1,127,590 | |---------------------------------------------------------------------------------------------------------------------------------------|------------------------| | Adjustments to reconcile net income to net cash provided by
operating activities:
Changes in assets:
(Increase) decrease in: | | | Decrease in prepaid expenses | 904 | | Increase in due from Parent/affiliates | (31,224) | | Net cash provided by operating activities | 1,097,270 | | Cash flows from financing activities:
Cash dividend paid
Net cash used for financing activities | (950,000)
(950,000) | | Net increase in cash | 147,270 | | Cash at beginning of year | 764,229 | | Cash at end of year | \$
911,499 | | Cash paid for income taxes | \$
396,972 | The accompainying notes are an integral part of these financial statements. {9}------------------------------------------------ ### **1. Nature of Business and Summary of Significant Accounting Policies** ### **Organization** Pentegra Distributors, Inc. (the "Company"), a wholly owned subsidiary of Pentegra Services, Inc. (the "Parent"), is registered with the Securities and Exchange Commission ( 11SEC11 ) as a broker-dealer and is a member of the Financial Industry Regulatory Authority ("FINRA"). ### **Principal Business Activities** The Company provides services in support of the retirement services business of its Parent, which involves the distribution of registered investment company shares through taxqualified and other plans and arrangements sponsored by clients of the Parent. #### **Financial Statement Estimates** The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reported period. Actual results could differ from those estimates. #### **RevenueRecognffion** The Company's revenues are generally recognized on the accrual basis in the period services are performed. Revenue is calculated using an agreed upon fee rate between the Parent and the Company of the fair market value on the last day of each month of all regulated investment company share assets for tax-qualified and other plans and arrangements sponsored by clients of the Parent. The Company believes the performance obligation for providing distribution services to the clients of the Parent are satisfied over time. #### **Income Taxes** The Company is included in consolidated U.S. federal and state income tax returns with its Parent. The Parent allocates income taxes to its subsidiaries as if the subsidiary filed as a separate taxpayer. The Company has provided for federal and state income taxes for the year. ### **Cash** Cash consists of bank deposits. The carrying amount approximates fair value because of the short maturity of this instrument. The Company maintains its cash in a single bank account that may exceed federally insured limits. The Company has not experienced any losses in such account and believes it is not exposed to any significant risk related to the cash account. {10}------------------------------------------------ ### **2. Regula tory Requirements** The Company is subject to the SEC Uniform Net Capital Rule (Rule 15c3-1), which requires the maintenance of minimum net capital and requires that the ratio of aggregate indebtedness to net capital, both as defined, shall not exceed 15 to l. At December 31, 2020, the Company had net capital of \$911,499, which was \$906,499 in excess of its required net capital of \$5,000. The Company's ratio of aggregate indebtedness to net capital was 0.00 to 1. The Company is exempt from SEC Rule l 5c3-3 paragraph (k} ( l ) in that its business is limited to the purchase and sale of shares of registered investment companies. ## **3. Related Party Transactions** Under an Expense Allocation and Services Fee Agreement with its Parent, the Company is charged a share of the expenses paid by its Parent proportional to the benefits the Company derives from the services provided by shared employees, plus a commensurate share of the combined overhead of the Company, the Parent and the Parent's other subsidiaries. In addition, the Parent will pay the Company a service fee of ten basis points of the fair market value of a ll regulated investment company share assets administered by the Parent on the last day of each month. These service fees are for all services provided by registered personnel of the Company in connection with the distribution of regulated investment company shares through tax-qualified and other plans and arrangements sponsored by clients of the Parent. Revenues generated from service fees under this agreement amounted to \$1,828,331 and represent 100 percent of the Company's revenue reported on the statement of income. Expenses allocated under this agreement of \$232,257 are included in compensation and benefits, professional fees, facilities and other expenses in the statement of income. In addition, the Parent acts as payment agent for the Company, disbursing certain other expenses of the Company, which then reimburses the amounts paid generally not later than the month following the payment. Such reimbursements for the year ended December 31, 2020 amounted to \$69,377. At December 31 , 2020, the Parent owed the Company \$96,728. The Parent also maintains a policy of funding the Company's losses, if any, through capital contributions. {11}------------------------------------------------ ### **4. Income Taxe s** The Company is included in the consolidated federal and state income tax returns filed by its Parent. Federal and state income taxes are calculated as if the Company filed on a separate return basis. There are no deferred taxes. The current income tax expense is as follows: | Federal | \$
300,337 | |--------------------|---------------| | State | 98,770 | | Total income taxes | \$
399,107 | Financial Accounting Standards Board Accounting Standards Codification Topic 740, Income Taxes, defines the criteria that an individual tax position must satisfy for some or all of the benefits of that position to be recognized in a company's financial statements. Topic 740 prescribes a recognition threshold of more-likely-than-not, and a measurement attribute for all tax positions taken or expected to be taken on a tax return, in order for those tax positions to be recognized in the financial statements. The Company has adopted these provisions and as a result of the implementation of these provisions, the Company did not have liability for unrecognized tax benefits. ### **5. Subsequent Events** Management has evaluated events and transactions subsequent to December 31, 2020 through the issuance date of these financial statements and no events have occurred requiring recognition or disclosure. ### **6. Legal Contingencies** Various legal claims may arise from time to time in the normal course of business, which, in the opinion of management. may or may not have a material effect on the Company's financial statements. At December 31 , 2020, the Company was not involved in any litigation or any other legal claims. {12}------------------------------------------------ #### Schedule I ### Com putation of Net Capital Under Rule 1 Sc3-1 of the Securities and Exchange Commission #### December 3 1, 2020 | Aggregate indebtedness | \$
0 | |--------------------------------------------------------------------------------------------------------------------|----------------------------| | Excess net capital | \$
906,499 | | Minimum net capital requirement of 6-2/
3% of aggregate
indebtedness of \$0 or \$5,000, whichever is greater | 5,000 | | Net capital | 91 1,499 | | Total shareholder's equity
Less: Non-allowable asset
s | \$
1,034,839
123,340 | | Computation of Net Capital | | The computation of net capital above does not materially differ from that reported by the Company in Part IIA of the Focus Report on Form X-17 A-5 at December 31, 2020. {13}------------------------------------------------ Schedule II Determination of Reserve Requirements and Information Relating to Possession or Control Requirements Under Rule 15c3-3 of the Securities and Exchange Commission ### December 31 , 2020 For the year ended December 31, 2020, the brokerage transactions of the Company were limited to the purchase and sale of shares of registered investment companies and the Company is, therefore, exempt from Rule l5c3-3 (paragraph (k)(l )). {14}------------------------------------------------ ![](_page_14_Picture_0.jpeg) #### **REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM** Board of Directors Pentegra Distributors, Inc. We have reviewed management's statements, included in the accompanying Report of Exemption from Rule 15c3- 3, in which (1) Pentegra Distributors, Inc. (the Company) identified the following provisions of 17 C.F.R. §15c3;3(k) under which the Company claimed an exemption from 17 C.F.R. §240.15c3-3: (k)(1) ("exemption provisions") and (2) the Company stated that the Company met the identified exemption provisions throughout the most recent fiscal year without exception. The Company's management is responsible for compliance with the exemption provisions and its statements. Our review was conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States) and, accordingly, included inquiries and other required procedures to obtain evidence about the Company's compliance with the exemption provisions. A review is substantially less in scope than an examination, the objective of which is the expression of an opinion on management's statements. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to management's statements referred to above for them to be fairly stated, in all material respects, based on the provisions set forth in paragraph (k)(1) of Rule 15c3-3 under the Securities Exchange Act of 1934. ~ *flu.1'vt /1Jc.nl-u.l* 1r- *~,.c,vyJ)* LLL Portland, Maine February 26, 2021 {15}------------------------------------------------ Report of Exemption from Rule l 5c3-3 December 31 , 2020 The Company does not handle cash or securities on behalf of any customers. It is exempt from compliance with SEC Rule 15c3-3 under paragraph (k) ( l ) of that rule since its business is limited to purchase and sales of mutual funds, and to the best of my knowledge and belief has been so throughout 2020 without exception. Lars G. Ernst VP, Chief Compliance Officer Source: SEC EDGAR via Adviser Search (https://search.stillhousedata.com). Agents: see https://search.stillhousedata.com/llms.txt.