SHREWSBURY, N.J. -- The planned merger of WesCorp with VolCorp included a capital payout plan whereby WesCorp would return VolCorp's member capital over a 20-year period.

Back in March NCUA's Office of Corporate Credit Unions advised corporates that the OCCU would be "reluctant to recommend" approval to the NCUA Board of merger applications that contain a payout of retained earnings in any form. "The recent trend in several merger negotiations, to include a payout of the merging corporate credit union's retained earnings, does not promote the objective of increasing retained earnings in the corporate system," NCUA wrote.

WesCorp and VolCorp have found a way to meet the OCCU's wishes, said Todd Lane, WesCorp's executive vice president and chief financial officer. WesCorp is effectively changing the payout away from a capital instrument to an expense item. WesCorp will pay VolCorp members a dividend each quarter based on a notional amount over the same 20-year period. The notional amount will be based on the surplus above VolCorp's 2.25% reserves and undivided earnings at the time of merger. Based on VolCorp's current RUDE, the surplus should be about $5 to $6 million, with WesCorp paying out approximately $26 million over 20 years.