NCUA Board Approves $736 Million Share Insurance Distribution in Q3 2018

Federally insured credit unions will have additional resources to put to work in their communities after the NCUA Board approved at its February meeting a $736 million Share Insurance distribution, which should be paid in the third quarter of 2018.

The Board voted unanimously in September 2017 to close the Temporary Corporate Credit Union Stabilization Fund. By law, the Stabilization Fund’s assets were transferred to the National Credit Union Share Insurance Fund. Had the Board not closed the Stabilization Fund, credit unions would not have received a distribution and could have faced premium charges totaling more than $1.3 billion in 2018.

“The NCUA’s prudent management of the corporate resolution process has provided us the ability to close the Stabilization Fund four years early,” NCUA Board Chairman J. Mark McWatters said. “This bipartisan action advances the objectives of protecting member deposits and maintaining a safe and sound credit union system and allows the NCUA to avoid a premium assessment and safely distribute funds to credit unions that can be put to work building local communities, creating new businesses, and improving the lives of members across the country.”

“This distribution is historic,” Board Member Rick Metsger said, “It is larger than the cumulative amount of all previous cash distributions since the capitalization of the Share Insurance Fund. When you add the $736 million credit unions will receive and the more than $1.3 billion in premiums they will avoid, the total is more than $2 billion. This is a huge benefit to credit unions and a lot of money for provident and productive purposes.”

Prior to the Board’s action in September 2017, the Stabilization Fund was scheduled to expire in 2021. A distribution became possible after the agency won legal recoveries of more than $5.1 billion on behalf of the five failed corporate credit unions, materially decreasing the costs to the Stabilization Fund resulting from those failures.

Final Rule Sets Distribution Framework

Credit unions will see greater fairness, predictability, and transparency under a final rule (Part 741) that was also approved by the NCUA Board at its February meeting. Specifically, the final rule amends the existing share insurance requirements rule and creates a temporary provision governing equity distributions related to the Corporate System Resolution Program.

The final rule amends the existing share insurance requirements rule and would give federally insured credit unions greater transparency on how an individual credit union’s share of an equity distribution from the Share Insurance Fund would be calculated. The rule also would prohibit a federally insured credit union that terminates its share insurance coverage from receiving a distribution for the calendar year in which that termination occurred unless that credit union filed at least one quarterly Call Report with the NCUA for that year.

Under the final rule, the NCUA Board will effect a pro rata distribution to a credit union that filed a quarterly Call Report as a federally insured credit union for at least one reporting period in calendar year 2017. This includes:

  • Active federally insured credit unions as of December 31, 2017;
  • Newly chartered federally insured credit unions that filed at least one Call Report for a
  • reporting period in 2017;
  • Financial institutions that converted to federal share insurance during 2017, provided they filed at least one Call Report as a federally insured credit union for a reporting period in 2017;
  • Credit unions that converted to private insurance, provided they filed at least one Call Report as a federally insured credit union for a reporting period in 2017; and
  • Liquidation estates, provided the liquidated credit unions filed at least one Call Report as federally insured credit unions for a reporting period in 2017.

The final rule retains the Board’s current policy of issuing distributions to federally insured credit unions and some financial institutions that leave the National Credit Union Share Insurance Fund through conversion, merger, or liquidation, provided they have filed a quarterly Call Report as a federally insured credit union for at least one reporting period in calendar year 2017.

The Share Insurance Fund distribution final rule will become effective 30 days after publication in the Federal Register. A detailed summary of the planned distribution and a list of frequently asked questions about the distribution formula is also available on our website.