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 of each of U.S. Central Federal Credit Union (U.S. Central), Western Corporate Federal Credit Union, Members United Corporate Federal Credit Union (Members United), Southwest Corporate Federal Credit Union (Southwest), and Constitution Corporate Federal Credit Union. 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 optimize recoveries to the AMEs. Until the AMEs are closed, a semi-annual evaluation of recoveries and obligations will be done to determine if sufficient funds are available for distribution to MCA and PIC holders.
2021 Corporate Credit Union Capital Distributions
Following a clean financial statement audit opinion on the National Credit Union Administration Share Insurance Fund, an evaluation conducted by the liquidating agent determined that sufficient funds were available for U.S. Central, Members United, and Southwest AMEs’ MCA holders to receive a distribution. The liquidating agent approved a total distribution of $368 million payable in April 2021. This is a pro-rata distribution from the AMEs to credit unions holding MCA claim certificates from each respective AME. The distribution includes $150 million to U.S. Central MCA claim holders, $126 million to Members United MCA claim holders and $92 million to Southwest MCA claim holders.
This distribution is to the MCA claim holders of U.S. Central, Members United, and Southwest only; no MCA claimants of other corporate AMEs are eligible for a portion of the distribution. The distribution has no impact on the health or operating level of the Share Insurance Fund.
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.
Calculating the Capital Distribution
On a quarterly basis, the liquidating agent calculates the anticipated recovery on assets and estimated expenditures for each corporate AME, along with tabulating past actual results. The reports on these calculations for the last four years can be found on the NCUA’s website.
All five corporate AMEs (U.S. Central, Western, Members United, Southwest, and Constitution) still have potential obligations to reimburse the NCUA for guaranty payment obligations on the NGNs, representing more senior claims than those of MCA and PIC holders based on the payout priority schedules. NCUA regulations permit distributions to MCA and PIC holders only after all senior claims have been fully satisfied, or sufficient provisions have been made.
Using a conservative provisioning approach and audited year-end 2020 financial statements, the liquidating agent has compared each estate’s cash to its remaining obligations. This analysis, which is completed annually in accordance with standard procedures, shows that funds are available for an interim payout to MCA holders of U.S. Central, Members United, and Southwest.
|In Millions of Dollars As of December 31, 20201||U.S. Central||Western||Members United||Southwest||Constitution|
|Available Cash (outside of NGNs)||192||0||97||73||0|
|Cash from U.S. Central Capital Distribution2||0||63||24||21||33|
|NGN Cash/Treasuries less NGN Notes||(30)||(86)||8||1||(7)|
|All Remaining Fiduciary Liabilities||(12)||(3,232)||(3)||(3)||(61)|
The chart below reflects the expected eventual payment to members and capital holders of the liquidated corporates as of December 31, 2020. Our projections indicate that additional funds will be available for distribution to U.S. Central, Members United, Southwest, and Constitution. However, until the underlying distressed assets securing the related NGN securities have been monetized, and liabilities paid, there are no guarantees of future performance. The liquidating agent will continue to take whatever actions are needed to safeguard and monetize assets under its management. Going forward, evaluations of future distributions will be performed on a semi-annual basis, as of December 31 and June 30.
|In Millions of Dollars as of Dec. 31, 20201||U.S. Central||Western||Members United||Southwest||Constitution|
|Distribution Potential (see above)||150||(3,312)||126||92||(65)|
|MCA/PIC Distributions Approved, March 2021||(150)||0||(126)||(92)||0|
|Net Realizable Value Estimate of Remaining Assets||1,544||802||213||230||73|
|Projected Additional Recovery from US Central AME||N/A||63||247||216||28|
|Projected Funds Available to Distribute||1,5444||(2,448)||460||447||35|
|Remaining MCA/PIC to Distribute||(1,836)||(1,144)||(446)||(140)||(67)|
|Potential Dividend to Members||0||0||14||307||0|
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 (opens new window) 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 NCUSIF@ncua.gov or hotline 877.452.1463.
1 Numbers may not add due to rounding.
2 The approved U.S. Central capital distribution to the other four AMEs has been included with the December 31, 2020 financial information to allow the calculation to reflect these funds as part of those AME’s Distribution Potential.
3 As the Share Insurance Fund still has valid claims against the WesCorp and Constitution Corporate AMEs, their share of the distribution will be used to pay down the liability owed to the Share Insurance Fund.
4 As this amount is gross, and the prior line in the chart shows distributions from U.S. Central to the other four corporates, the funds available to distribute to on-going MCA holders equal $990 million.