Some credit unions are on the cusp of receiving an estimated nearly $3 billion in distributions of membership capital, paid-in capital and liquidating dividends resulting from the liquidations of five failed corporate credit unions, outgoing NCUA Board Member J. Mark McWatters wrote Thursday.
“It is my hope that the agency will begin making distributions to the former members of the failed Corporates as soon as is prudently and legally possible and will continue the distributions until the funds are exhausted,” McWatters wrote. “Today, during the pandemic, the former corporate members would no doubt welcome any such distributions.”
In a column published on news site CUToday.info, McWatters congratulated intended nominee to the NCUA Board Kyle Hauptman, who will take McWatters’ seat on the board if he is confirmed by the Senate. McWatters has been serving in a holdover capacity since his term expired last summer.
Later in the essay, McWatters stated he “was surprised to learn that some credit union leaders were not aware that the NCUA, hopefully, is nearing the point where it will begin remitting distributions to former members of the failed corporate credit unions – U.S. Central, WesCorp, Members United, Southwest, and Constitution.”
According to McWatters, the details of the payout were outlined in a year-end 2019 report on the NCUA website. The report was created in March and modified in May. The “Corporate Asset Management Estates Recoveries and Claims, as of 12/31/2019” report outlines the potential future distributions from the Asset Management Estates of the five failed Corporates.
It notes specifically that former members of the five failed corporates would receive payments. Those include:
- Projected repayments of membership capital: U.S. Central, $1.666 billion; Members United, $493 million; Southwest, $404 million, and Constitution, $36 million.
- Projected repayments of paid in capital: Members United, $79 million.
- Projected potential liquidating dividends: Members United, $16 million; and Southwest, $299 million.
The payouts total $2.99 billion.
“Corporate” credit unions serve as a form of “bankers’ banks” for credit unions. They have been used as a repository for excess funds held by credit unions, and as a source of liquidity. In the wake of the financial crisis more than 10 years ago, a number of the credit unions failed when investments they had made in residential mortgage backed securities (RBMS), among other things, collapsed along with the housing market.
McWatters was careful to note that the amounts were projected as of Dec. 31, 2019, and could change before any distributions are actually made. “In any event, these projected distributions will most likely exceed the distributions made from the merger of the Temporary Corporate Credit Union Stabilization Fund (TCCUSF) into the National Credit Union Share Insurance Fund (NCUSIF),” McWatters noted. Those distributions totaled nearly $736 million, beginning in July 2018.