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Management at corporate-owned Primary Financial Co. LLC is celebrating a banner 2008 and hoping its SimpliCD program’s success will help the CUSO keep the momentum going this year.The Westerville, Ohio-based CUSO, which is owned by 27 corporate credit unions and serves more than 4,000 credit unions through its SimpliCD certificate placement service, recently released its 2008 annual report. Primary Financial said it secured $9 billion in brokered certificates of deposit placements. It also said net income reached almost $4 million and its corporate credit union owners earned fees and distribution payments of more than $8 million. Overall, it helped to generate $650 million in liquidity and helped investors earn more than $215 million in yield, according to Primary Financial.As a result of the CUSO’s 2008 activity, payments to its co-brokers increased by 350% over 2007, reaching more than $7 million last year, exclusive of its first capital distribution of $1.1 million, according to Primary Financial’s annual report.There are now 4,000 credit unions that are doing business with the SimpliCD program, which allows for the investment of funds in federally insured CDs or issuing CDs to a national market of potential investors, the CUSO said.“I’m proud that we’ve been able to help so many credit unions add to their bottom line at a time when they need it most,” said Lew Lambert, president, Minnesota operations for Members United Federal Credit Union, and Primary Financial’s chairman of the board.According to Mark Solomon, president/CEO of Primary Financial, the CUSO now has relationships with more than 50% of the credit unions in the United States, and more than 40% of all credit unions have investments in the SimpliCD program.“We believe this is the best testament to the quality and value the SimpliCD program offers to credit unions of all sizes,” Solomon said.Primary Financial bought the CD program from Corporate One Federal Credit Union in 2003. At the time, the CUSO agreed to pay the corporate amounts above the spread it pays to corporate co-brokers for placements of certificates of deposit for 12 years from the purchase date. Primary Financial also agreed to pay Corporate One for five years from the same purchase date in 2003 a portion of the spread on all certificates placed by certain co-brokers that were placing certificates at the time of the purchase. This five-year period ended Aug. 31, 2008. These additional payments are considered compensatory and are expensed as incurred, according to Primary Financial’s annual report. Such expense was $763,900 and $363,200 in 2008 and 2007, respectively, and were included in the co-broker spread.Corporate One was also to receive a royalty on all other co-broker placements through Primary Financial, including all placements by new co-brokers from 2003 to 2015.These royalties are considered additional purchase consideration and have been recorded as additional goodwill. The total of such additional goodwill was $424,200 and $92,100 in 2008 and 2007, respectively. The goodwill and identifiable intangible assets relate to the 2003 purchase from Corporate One. Goodwill is not amortizable but is subject to an annual impairment test, Primary Financial said. The annual impairment test involves comparing the fair value of the CUSO to its carrying amount. If the fair value exceeds the carrying amount, goodwill is considered not to be impaired.Primary Financial’s fair value is an estimate because no ready market exists for the ownership interests of the CUSO, according to the annual report. Such estimate of fair value is calculated based upon the present value of estimated future cash flows. There were no impairment losses in 2008 or 2007. Identifiable intangible assets consist of acquired co-broker relationships and are amortized straight-line over their estimated useful lives of five years. Accumulated amortization of the identifiable intangible asset was $459,200 and $398,000 at Dec. 31, 2008 and 2007, respectively. The identifiable intangible asset was fully amortized at Dec. 31, 2008.Corporate One also performs accounting and marketing services for Primary Financial under a support services contract. The one-year contract has provisions for automatic annual renewals. Expense related to this agreement was $171,600 in 2008 and $165,000 in 2007, according to the CUSO.Cash represents demand deposits with Corporate One and other financial institutions. At Dec. 31, 2008 and 2007, demand deposits held in interest-bearing accounts at Corporate One totaled $814,000 and $3.88 million, respectively. An $8 million line of credit was extended to Primary Financial to be used to facilitate the settlement of customer transactions. The credit line is secured by the CUSO’s assets with the interest rate equal to the rate Corporate One charges other borrowers under similar lending agreements, according to the annual report. At Dec. 31, 2008 and 2007, no advances were outstanding on the credit line.As a licensed securities dealer in Ohio, Primary Financial is required to maintain net capital of at least $25,000. As of Dec. 31 2008 and 2007, the CUSO said it was in compliance with this requirement.Loss contingencies, which include claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Primary Financial’s management said it does not believe there currently are such matters that will have a material effect on the company’s financial statements.–[email protected]

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