# PENTEGRA DISTRIBUTORS INC. X-17A-5 (2023-03-01) — Broker-dealer annual report - Company: PENTEGRA DISTRIBUTORS INC. - Form: X-17A-5 - Filed: 2023-03-01 - Period: 2022-12-31 - Accession: 0000861941-23-000001 - CIK: 861941 - File #: 8-42445 - Type: Broker-dealer - Material weakness: No - Auditor: Berry, Dunn, McNeil, & Parker, LLC - Auditor location: Portland, ME - Contact: Lars G. Ernst - Phone: 914-821-9554 - Email: lars.ernst@pentegra.com - Website: pentegra.com - Signed by: Lars G. Ernst (VP, CCO) Original filing: https://www.sec.gov/Archives/edgar/data/861941/000086194123000001/pentegrafs20223.pdf --- {0}------------------------------------------------ Financial Statements and Supplementary Schedules Pursuant to Rule l 7a-5 of the Securities Exchange Act of 1934 As of and for the year ended December 31 , 2022 {1}------------------------------------------------ | | 0MB APPROVAL | | | | | | |-----------------------------------------------------------------------------------------------------------|-------------------------------------------------|---------------------------|--------------------------------------------|--|--|--| | SECURITIES AND EXCHANGE COMMISSION | 0MB Number: 3235-0123
Expires: Oct. 31, 2023 | | | | | | | | Estimated average burden | | | | | | | | | hours per response:
12 | | | | | | | SEC FILE NUMBER | | | | | | | | FORM X-17A-S | | 8-42445 | | | | | | PART Ill | | | | | | | | | | | | | | | | FACING PAGE | | | | | | | Information Required Pursuant to Rules 17a-5, 17a-12, and 18a-7 under the Securities Exchange Act of 1934 | | | | | | | | FILING FOR THE PERIOD BEGINNING 0 1/01 /22 | | | AND ENDING 12/31 /22 | | | | | | MM/DD/YY | | MM/00/YY | | | | | | A. REGISTRANT IDENTIFICATION | | | | | | | NAME oF FIRM: Pentegra Distributors, Inc. | | | | | | | | | | | | | | | | TYPE OF REGISTRANT (check all applicable boxes): | | | | | | | | ~ Broker-dealer | O Security-based swap dealer | | 0 Major security-based swap participant | | | | | D Check here if respondent is also an OTC derivatives dealer | | | | | | | | | | | | | | | | ADDRESS OF PRINCIPAL PLACE OF BUSINESS: {Do not use a P.O. box no.) | | | | | | | | 701 Westchester Avenue, Suite 320E | | | | | | | | | (No. and Street) | | | | | | | White Plains | NY | | 10604 | | | | | (City) | (State) | (Zip Code) | | | | | | | | | | | | | | PERSON TO CONTACT WITH REGARD TO THIS FILING | | | | | | | | Lars G. Ernst | (914) 821-9554
lars.ernst@pentegra.com | | | | | | | (Name) | (Area Code -Telephone Number) | | (Email Address) | | | | | | B. ACCOUNTANT IDENTIFICATION | | | | | | | | | | | | | | | INDEPENDENT PUBLIC ACCOUNTANT whose reports are contained in this filing* | | | | | | | | Berry, Dunn, McNiel & Parker, LLC | | | | | | | | (Name - if individual, state last, first, and middle name) | | | | | | | | 2211 Congress Street | Portland | | ME
04102 | | | | | (Address) | (City) | (State) | (Zip Code) | | | | | 10/08/2003 | | 136 | | | | | | (Date of Registration with PCAOB)(if applicable) | | | (PCAOB Registration Number, if applicable) | | | | | | FOR OFFICIAL USE ONLY | | | | | | | | | | | | | | | | | | | | | | \* Claims for exemption from the requirement that the annual reports be covered by the reports of an independent public accountant must be supported by a statement of facts and circumstances relied on as the basis of the exemption. See 17 CFR 240.17a-S(e)(l)(ii), if applicable. 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. {2}------------------------------------------------ #### **OATH OR AFFIRMATION** | I, Lars G. Ernst | | swear (or affirm) that, to the best of my knowledge and belief, the | | |----------------------------------|------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------| | | 2~
financial report pertaining to the firm of Pentegra Distributors, Inc. | | as of | | 12/31 | | is true and correct. I further swear (or affirm) that neither the company nor any | | | as that of a customer.
~-~ion | Colleen M. Zanicchi
Notary Public State of New York
No. 0'1 FA6024454
Qualified in westc~ester Co~
Expires05/10j | partner, officer, director, or equivalent person, as the case may be, has any proprietary interest in any account classified solely
Signatur~ Jst:-:G.~
Title:
VP, Chief Compliance Officer | | | ~~blk | | | | #### **This filing\*\* contains (check all applicable boxes):** - I!! (a) Statement of financial condition. - D (b) Notes to consolidated statement of financial condition. - I!! (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). - I!! (d) Statement of cash flows. - **!!!I** (e) Statement of changes in stockholders' or partners' or sole proprietor's equity. - □ (f) Statement of changes in liabilities subordinated to claims of creditors. - I!! (g) Notes to consolidated financial statements. - I!! (h) Computation of net capital under 17 CFR 240.15c3-1 or 17 CFR 240.18a-1, as applicable. - D (i) Computation of tangible net worth under 17 CFR 240.18a-2. - I!! (j) Computation for determination of customer reserve requirements pursuant to Exhibit A to 17 CFR 240.15c3-3. - D (k) Computation for determination of security-based swap reserve requirements pursuant to Exhibit B to 17 CFR 240.15c3-3 or Exhibit A to 17 CFR 240.18a-4, as applicable. - □ (I) Computation for Determination of PAB Requirements under Exhibit A to§ 240.15c3-3. - I!! (m) Information relating to possession or control requirements for customers under 17 CFR 240.1Sc3-3. - □ (n) Information relating to possession or control requirements for security-based swap customers under 17 CFR 240.15c3-3(p)(2) or 17 CFR 240.18a-4, as applicable. - I!! (o) Reconciliations, including appropriate explanations, of the FOCUS Report with computation of net capital or tangible net worth under 17 CFR 240.15c3-1, 17 CFR 240.18a-l, or 17 CFR 240.18a-2, as applicable, and the reserve requirements under 17 CFR 240.15c3-3 or 17 CFR 240.18a-4, as applicable, if material differences exist, or a statement that no material differences exist. - D (p) Summary of financial data for subsidiaries not consolidated in the statement of financial condition. - I!! (q) Oath or affirmation in accordance with 17 CFR 240.17a-5, 17 CFR 240.17a-12, or 17 CFR 240.18a-7, as applicable. - D (r) Compliance report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - I!! (s) Exemption report in accordance with 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - D (t) Independent public accountant's report based on an examination of the statement offinancial condition. - I!! (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-12, as applicable. - D (v) Independent public accountant's report based on an examination of certain statements in the compliance report under 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - D (w) Independent public accountant's report based on a review of the exemption report under 17 CFR 240.17a-5 or 17 CFR 240.18a-7, as applicable. - □ (x) Supplemental reports on applying agreed-upon procedures, in accordance with 17 CFR 240.15c3-le or 17 CFR 240.17a-12, as applicable. - D (y) Report describing any material inadequacies found to exist or found to 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 of this filing, see 17 CFR 240.17a-5(e)(3) or 17 CFR 240.18a-7(d)(2), as applicable. {3}------------------------------------------------ Financial Statements and Supplementary Schedules As of and for the year ended December 31, 2022 ## **Contents** | Facing Page and Oath or Affirmation | | | | | |------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--| | Report of Independent Registered Public Accounting Firm 1 | | | | | | 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: | | | | | | Computation of Net Capital Under Rule 15c3-1 of the Securities and
Schedule:
Exchange Commission 9
Determination of Reserve Requirements and Information Relating to
Schedule:
II
Possession or Control Requirements Under Rule 15c3-3 of the
Securities and Exchange Commission 10 | | | | | | Report of Independent Registered Public Accounting Firm -
Exemption Review
Report 11 | | | | | | Report of Exemption from Rule 15c3-3
12 | | | | | {4}------------------------------------------------ # **6) BerryDunn** #### **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 , 2022, the related statements of income, changes in shareholder's 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 as of December 31 , 2022, 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. ~ llu,vl */l)C n/.~.d* l"t- *~r-( rv~t ll(..* We have served as the Company's auditor since 2007. Portland, Maine February 23, 2023 Berry, Dunn, McNeil & Parker (NY) LLC • berrydunn.com {5}------------------------------------------------ Pentegra Distributors, Inc. Statement of Financial Condition December 31 , 2022 | Assets: | | | |--------------------------------------------------------------------------------|-----------------|--| | Cash | \$
1,204,472 | | | Due from parent | 69,138 | | | Prepaid expenses | 24,493 | | | Total assets | \$
1,298,103 | | | Shareholder's equity:
Common stock, \$.01 par value; 100 shares authorized; | | | | l 00 shares issued and outstanding | l | | | Additional paid-in capital | 25,351 | | | Retained earnings | 1,272,751 | | | Total shareholder's equity | \$
1,298,103 | | {6}------------------------------------------------ Pentegra Distributors, Inc. Statement of Income Year Ended December 31, 2022 | Revenue: | | |----------------------------------|-----------------| | Service income | \$
2,003,682 | | Expenses: | | | Compensation and benefits | 207,351 | | Professional fees | 29,250 | | Regulatory fees | 35,147 | | Facilities | 35,620 | | Other | 27,625 | | Total expenses | 334,993 | | Income before income tax expense | 1,668,689 | | Income tax expense | 435,585 | | Net income | \$
1,233,104 | {7}------------------------------------------------ # Pentegra Distributors, Inc . Sta tement of Changes in Shareholder's Equity Year Ended December 31, 2022 | | | | | | Additio nal | | | | Total | |-----------------------------------|--------------|----|---------|----|-------------|----|---------------------------|----|--------------------------| | | Common Stock | | Paid-In | | Retained | | Shareholder's | | | | | Shares | | Amount | | Capital | | Earnings | | Equity | | Balance, December 31, 202
1 | 100 | \$ | | \$ | 25,35 1 | \$ | 1,464,647 | \$ | 1,489,999 | | Div idend to Parent
Net income | | | | | | | (1 ,425,000)
1,233,104 | | (1,425,000)
1,233,104 | | Balance, December 31, 2022 | 100 | \$ | | \$ | 25,35 1 | \$ | 1,272,75 1 | \$ | 1,298,103 | {8}------------------------------------------------ Statement of Cash Flows Year Ended December 31 , 2022 | Cash flows from operating activities
Net income | \$
1,233,104 | |------------------------------------------------------------------------------------------------------------|-----------------| | Adjustments to reconcile net income to net cash provided by
operating activities:
Changes in assets: | | | Decrease in prepaid expenses | 3,895 | | Decrease in due from parent/affiliates | 42,393 | | Net cash provided by operating activities | 1,279,392 | | Cash flows from financing activities:
Cash dividend paid | {1,425,000) | | Net decrease in cash | {145,608) | | Cash at beginning of year | 1,350,080 | | Cash at end of year | \$
1,204,472 | | Cash paid for income taxes | \$
441,616 | | | | {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 ("SEC") 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. #### **RevenueRecognmon** 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. Portions of the fees are dependent on average net assets of the investment company shares. These variable amounts are recognized to the extent it is probable that a significant reversal will not occur once the uncertainty is resolved. As the uncertainty is dependent on the value of the shares at future points in time as well as the length of time the investor remains in the investment company shares, both of which are highly susceptible to factors outside the Company's influence, the Company does not believe that it can overcome this constraint until the market value of the investment company shares and the investor activities are known, which are usually monthly. The Company believes the performance obligation for providing distribution services to 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. {10}------------------------------------------------ # **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. # **2. Regulatory Requirements** The Company is subject to the SEC Uniform Net Capital Rule (Rule l 5c3- l), 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 1. At December 31 , 2022, the Company had net capital of \$1 ,204,472, which was \$1 ,199,472 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) (1) 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 all 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 \$2,003,682 and represent 100 percent of the Company's revenue reported on the statement of income. Expenses allocated under this agreement of \$264,739 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 , 2022 amounted to \$70,254. At December 31 , 2022, the Parent owed the Company \$69,138. The Parent also maintains a policy of funding the Company's losses, if any, through capital contributions. {11}------------------------------------------------ # **4. Income Taxes** 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 | \$
327,788 | |--------------------|---------------| | State | 107 797 | | Total income taxes | \$
435.585 | 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. SubsequentEvenh** Management has evaluated events and transactions subsequent to December 31 , 2022 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 , 2022, the Company was not involved in any litigation or any other legal claims. {12}------------------------------------------------ ### Schedule I ## Computation of Net Capital Under Rule l 5c3-l December 31 , 2022 Computation of Net Capital | Total shareholder's equity
: Non-allowable assets
Less | \$
1,298,103
93,631 | |-----------------------------------------------------------------------------------------------------------------|---------------------------| | Net capital | 1,204,472 | | Minimum net capital requirement of 6-2/3% of aggregate
indebtedness of \$0, or \$5,000, whichever is greater | 5,000 | | Excess net capital | \$
1,199,472 | | Aggregate indebtedness | \$
0 | | Ratio of aggregate indebtedness to net capital | 0 to 1 | 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 , 2022. {13}------------------------------------------------ Schedule II Determination of Reserve Requirements and Information Relating to Possession or Control Requirements Under Rule l 5c3-3 of the Securities and Exchange Commission ## December 31 , 2022 For the year ended December 31 , 2022, 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 l 5c3-3 (paragraph (k) ( 1)) . {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. ~ au\_,,\_/!. *IT)c\_ N-u.* I ~ ~,.-c rvY J J LL(.. Portland, Maine February 23, 2023 ![](_page_14_Picture_8.jpeg) {15}------------------------------------------------ Report of Exemption from Rule l 5c3-3 December 31 , 2022 The Company does not handle cash or securities on behalf of any customers. It is exempt from compliance with SEC Rule l 5c3-3 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 2022 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.