Corporate Capital Distribution Process

Following the liquidation of five corporate credit unions during the Corporate System Resolution effort, the NCUA Board, as liquidating agent, issued claim certificates to all liquidated corporate credit union membership-capital account (MCA) and paid-in capital (PIC) holders. The claim amounts were based on the balance each credit union holding MCA and PIC was instructed to write off in the year preceding liquidation, during the financial crisis, regarding MCA and PIC balances at corporate credit unions. These certificates represent claims against the individual asset management estates (AMEs) of each failed corporate credit union.

Since then, employees in the NCUA’s Office of General Counsel, Office of Examination and Insurance, the Asset Management and Assistance Center (AMAC), and members of the NCUA Guaranteed Note (NGN) Committee have been working to maximize recoveries to the AMEs. Until the AMEs are closed, an evaluation of recoveries and obligations will be done at least semi-annually to determine if sufficient funds are available for distribution to MCA and PIC holders.

2021 Projected Corporate Credit Union Capital Distributions

An evaluation conducted by the liquidating agent determined that sufficient funds will be available for U.S. Central Federal Credit Union (U.S. Central), Members United Corporate Federal Credit Union (Members United), and Southwest Corporate Federal Credit Union (Southwest) AMEs’ MCA holders to receive a distribution. The liquidating agent expects at least a $865.5 million distribution to be made effective June 30, 2021, and payable by September 2021. The following chart shows the distribution as a percentage of each capital holders original claim against the respective estates:

as a % of original claim U.S. Central Western Members United Southwest Constitution
Projected Sept 2021 Distribution 41% 0% 44% 35% 0%

This distribution is from the U.S. Central, Members United, and Southwest AMEs; and, has no impact on the health or operating level of the Share Insurance Fund.

The liquidating agent also projects an additional distribution in early 2022 to Members United and U.S. Central MCA claim holders based on planned investment sales scheduled to occur between July 1 and December 31, 2021. Further, this is a point-in-time estimate, subject to change, and largely dependent on the Liquidating Agent’s ability to affect and orderly liquidate post-securitized assets. Southwest MCA holders are projected to have already recovered 100% with the distribution planned for September 2021.

The following distribution is projected from the individual AMEs to capital holders holding MCA claim certificates from each respective estate.

as a % of original claim U.S. Central Western Members United Southwest Constitution
Projected early 2022 MCA Distribution 20% 0% 20% 0% 0%
Projected cumulative early 2022 MCA Distribution 70% 0% 90% 100% 0%

Following the projected distribution effective December 31, 2021, and payable early 2022, claimants for US Central, Members United and Southwest Corporate AMEs will have cumulatively received 70%, 90%, and 100%, respectively of outstanding member capital account claims against the estates. Paid in capital (PIC) account holders will not receive a distribution until all MCA holders of an estate are paid in full.

The following chart reflects the original MCA and PIC claims for all AMEs and payments made and projected through the September distribution. In addition, the ultimate cumulative projected claims paid as a percentage of total MCA and PIC claims against the AMEs are included to illustrate the estimated eventual capital repayments. Please note that PIC claims have the lowest payout priority (see NCUA Rules and Regulations 709.5) and the projected distribution amounts effective 6/30/21 shown in the chart below are with respect only to the satisfaction of MCA claims against the respective AMEs. The timing and amount of additional distributions as shown below will depend on future performance, release of legal holds and orderly liquidation of legacy assets.

amount ($ in millions) U.S. Central Western Members United Southwest Constitution
Original MCA Claims 1,686 931 493 404 67
Original PIC Claims 300 213 79 0 0
Total Original MCA & PIC Claims 1,986 1,144 572 404 67
Distribution 7/2020 (eff. 12/31/2019)       -172  
Distribution 4/2021 (eff. 12/31/2020) -150 0 -126 -92 0
Proj. Distribution 9/2021 (eff. 6/30/2021) -710 0 -229 -140 0
Projected Remaining MCA & PIC Claims as of 9/2021 (eff. 6/30/2021) 1,126 1,144 217 0 67
Ultimate Cumulative Proj. % of MCA Claims Paid 100% 0% 100% 100% 52%
Ultimate Cumulative Proj. % of PIC Claims Paid 3% 0% 100% N/A N/A

Note the April 2021 and September 2021 projected distribution include $45.1 and $213.5 million respectively of funds that flow through U.S. Central AME to Members United and Southwest AMEs, providing a source of funds to these estates in addition to their own funds, which are then combined and redistributed to their claimants. On a net basis this resulted in $323.6 million in April 2021 and projected $865.5 million in September 2021 to the system.

Per the NCUA regulations, 12 C.F.R. §709.5(e), “[a]ll unsecured claims of any category or class or priority described in paragraphs (b)(1) through (b)(7) of [§ 709.5] shall be paid in full, or provisions made for such payment, before any claims of lesser priority are paid. If there are insufficient funds to pay all claims of a category or class, payment shall be made pro rata. Notwithstanding anything to the contrary in [§ 709.5], the liquidating agent may, at any time, and from time to time, prior to the payment in full of all claims of a category or class with higher priority, make such distributions to claimants in priority categories described in paragraphs (b)(1), (b)(2), (b)(3), (b)(4), and (b)(5) of [§ 709.5] as the liquidating agent believes are reasonably necessary to conduct the liquidation, provided that the liquidating agent determines that adequate funds exist or will be recovered during the liquidation to pay in full all claims of any higher priority. If a surplus remains after making distribution in full on all allowed claims described in paragraphs (b)(1) through (b)(9) of [§ 709.5], such surplus shall be distributed pro rata to the credit union's shareholders.”

After ensuring adequate funds exist to fully pay all prior levels, it was determined that a partial distribution to MCA holders at § 709.5(b)(7) for U.S. Central, Members United, and Southwest is permissible.

Corporate Capital Distributions and the Share Insurance Fund

The Temporary Corporate Credit Union Stabilization Fund was established for the corporate credit union liquidations as part of the financial crisis in 2010. The Stabilization Fund was principally responsible for covering losses of the failed corporates until it was closed and the liabilities were assumed by the Share Insurance Fund in 2017.

The payment of insured shares by the Share Insurance Fund becomes a claim against the liquidation estate of the closed institution, under 12 C.F.R. § 709.5(b)(6). Before any funds can be paid out at the (b)(7) level – MCA – all higher levels must be paid in full, or provisions made for such payment.

The Share Insurance Fund has been made whole for the payout of insured member shares with respect to U.S. Central, Members United, and Southwest. Additionally, provisions were made for all anticipated continuing liquidation expenses, including obligations to reimburse the Share Insurance Fund for potential guaranty payments or the funding of other liquidating expenses for these three estates. Thus, the distribution to MCA claim certificate holders of U.S. Central, Members United, and Southwest will have no impact on the Share Insurance Fund.

Electronic Funds Transfer Payments Form

This authorization agreement for electronic funds transfers (EFT) is intended for use by federally insured credit unions, not NCUA vendors or the public.

NCUSIF Authorization for EFT Payments in PDF (28 KB)

This form provides credit unions with a convenient means of providing the liquidating agent with needed information to make electronic payments to credit unions. The completed form can be mailed or faxed to the liquidating agent using the information provided on the bottom of the form.

Any comments or questions should be directed to the NCUA’s Office of the Chief Financial Officer at or hotline 877.452.1463.

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