Effective June of 2021, Membership Capital Account (MCA) holders from the U.S. Central Federal Credit Union (U.S. Central) and Members United Corporate Federal Credit Union (Members United) will receive a partial distribution and Southwest Corporate Federal Credit Union (Southwest), will receive a final distribution. Below are frequently asked questions related to the distributions.
Member Capital Distribution
Why are the distributions for U.S. Central, Members United, and Southwest happening at this time?
All five corporate asset management estates (AMEs), U.S. Central, Western, Members United, Southwest, and Constitution, still have potential obligations to reimburse the NCUA which represent more senior claims in the payout priorities.1 NCUA regulations permit distributions to depleted capital holders only after all more senior claims have been fully paid or sufficient provisions have been made for them.
Using a conservative provisioning approach, and in accordance with standard operating procedures for the AMEs, the liquidating agent has compared each AME’s cash to its remaining obligations. This analysis projected that funds will be available for a distribution to MCA holders of U.S. Central, Members United, and Southwest in September 2021 based on the effective June 30, 2021 financial statements. The liquidating agent also projects an additional distribution in early 2022 to Members United and U.S. Central member capital account (MCA) claim holders based on planned investment sales scheduled to occur between July 1 and December 31, 2021. 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 projected September distributions can occur, regardless of current and future economic events, as they are based solely on cash reserves, and not dependent upon the performance of any other remaining asset or obligation. Capital holders receiving a distribution in September 2021 will receive an email with final distribution percentage and a letter with information specific to their claim balance and interim distribution amount by August 20, 2021.Close and return to top
How will the current economic environment affect future distributions?
Economic events, including the fallout from COVID-19, will impact the amount and timing of any future distributions as the future performance and ultimate monetization of remaining assets will depend on underlying market conditions and investor demand for the remaining legacy assets.Close and return to top
How much are the projected 2021 Corporate MCA distributions?
The projected MCA distributions for 2021 (based on June 30, 2021, and December 31, 2021, financial statements) are shown in this chart. MCA holders may receive additional distributions in the future, depending on market conditions and the sale of remaining legacy assets. 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 recover 100% with the distribution planned for September 2021.
|as a % of original claim||U.S. Central||Western||Members United||Southwest||Constitution|
|Projected Distribution effective 6/30/2021 (Payable in Sept 2021)||41%||0%||44%||35%||0%|
|Projected Distribution effective 12/31/2021 (Payable early 2022)||20%||0%||20%||0%||0%|
When and how will the distributions be made?
The MCA distributions will be remitted via electronic funds transfer (EFT) by September 2021 and first quarter of 2022, using the banking information the liquidating agent has on file.2 If the credit union previously provided its EFT information to the NCUA and no changes are required, no further action is needed. If NCUA does not have your EFT information or you are unsure, please complete the authorization agreement for EFT payments (opens new window) to make necessary updates. If the NCUA does not have EFT information on file, we will reach out to distribution recipients to complete the authorization agreement for EFT payments. The liquidating agent will work with each non-credit union distribution recipient to ensure timely receipt of the distribution.Close and return to top
Who will receive these distributions?
U.S. Central, Members United, and Southwest member capital holders of record with the liquidating agent will receive MCA distributions. After accounting for mergers, purchases and assumptions, and liquidations, over 1,800 active credit unions will receive a distribution.Close and return to top
Will capital holders of other corporate AMEs receive a distribution this year?
The three corporate AMEs referenced above have sufficient funds at this time for a member capital distribution effective June 30, 2021, with distribution in September 2021. Currently, funds are not available for a distribution to Western or Constitution capital holders. Based on March 2021 financials, Western and Constitution AMEs owe funds to the NCUSIF. The table below shows amounts due to the NCUSIF.
|Amount ($ in millions) at 3/31/2021||U.S. Central||Western||Members United||Southwest||Constitution|
|Outstanding Claims due to NCUSIF||14.2*||-2,886.6||6.1*||2.1*||-31.7|
|Projected Recovery to NCUSIF||-14.2||413.3||-6.1||-2.1||31.7|
|Projected Loss to NCUSIF||0||-2,473.3||0||0.0||0.0|
* Proceeds allocated to US Central, Members United and Southwest were received by NCUSIF late in March and not yet disbursed by 03/31/2021. These funds were provided to the fiduciary cash accounts of these Corporate AMEs in early April.
While Constitution capital holders are not projected to receive a distribution in 2021, the ultimate cumulative projected recovery for Constitution capital holders is 52 percent. Western capital holders are not projected to receive any recovery of capital. The liquidating agent will perform this analysis semi-annually to determine if sufficient funds are available at that time for additional distributions.Close and return to top
Does this distribution affect the NCUSIF equity ratio?
It does not. The three corporate AMEs already reimbursed the Share Insurance Fund for all Share Insurance Fund payments related to the liquidation process. This distribution represents surplus recoveries from the monetization of these Corporates’ assets. Once the Share Insurance Fund is repaid, any remaining funds (after monetization) must be distributed first to the capital holders, and then (should funds remain) as a pro rata dividend to each of the Corporate’s shareholders of record at the time of liquidation.Close and return to top
What accounting entry should a credit union initially make to record its member capital distribution?
Corporate member capital holders can utilize the membership-capital account (MCA) balance as noted on the 2010 claim receipt and multiply that balance using the percent stated above to arrive at its estimated distributions. A capital holder may recognize that amount in its income statement as other operating income and record a receivable on its balance sheet for the same amount.
For example, Credit Union ABC calculates its payment from the capital distribution to be $106,150. Credit union ABC would make the following journal entry:
Credit:Other Operating Income$106,150
How should credit unions record the distribution and report the distribution on the Call Report?
For Call Report purposes, if necessary, the member capital distribution should be reported on the Statement of Income and Expense on line item 13 – Other Operating Income. The corresponding receivable should be reported on the Statement of Financial Condition on line item 24c – All Other Assets.Close and return to top
Where can I find more information?
For updates and more detailed information, visit these sites:
- Corporate Asset Management Estate Recoveries and Claims;
- NGN Questions and Answers (opens new window);
- Corporate System Resolutions Costs; and
- NGN Program