NCUA to Return $395 Million to Credit Unions Next Month

The NCUA announced Monday it will pay credit unions $395 million in September from the remainders of four corporate credit unions it liquidated in 2010.

The NCUA, as liquidating agent, will distribute $313 million to more than 400 membership and paid-in-capital shareholders of the former Members United, Constitution and U.S. Central corporate credit unions. It will also distribute $82 million in dividends to more than 1,100 shareholders of Southwest Corporate.

The NCUA completed capital distributions to Southwest Corporate capital holders last year.

The distribution announced Monday is scheduled to occur by Sept. 30. With this fifth distribution, the NCUA will have returned more than $2.6 billion to former membership and paid-in capital shareholders and almost $292 million in dividends to shareholders.

“The NCUA has reached another milestone in winding down the remaining asset management estates under the successful Corporate System Resolution Program,” NCUA Chair Todd Harper said in a news release.

“Thanks to the diligent efforts of the NCUA team over more than a decade, we continue to fulfill our fiduciary responsibility to return these funds to capital holders,” he said. “As a result, the federally insured credit unions receiving these distributions will have the capacity to lend more and better offer safe, fair and affordable financial products. That is good for credit union members and for our economy.”

The NCUA has previously made four rounds of distributions from the corporate credit unions’ asset management estates. In 2020, 2021 and the first quarter of 2022, distributions were made to capital holders of Southwest, Members United, Constitution and U.S. Central.

The NCUA set up the Corporate System Resolution Program “to stabilize, resolve and reform the corporate credit union system in the wake of the 2008 financial crisis.” It said the program allowed the credit union system to absorb the failures of U.S. Central, Western, Southwest, Members United and Constitution corporate credit unions over time.

Some of the recoveries were from suits the NCUA brought against major banks that participated in the sale of residential mortgage-backed securities that were a major contributor to the financial crisis. The NCUA said those securities also contributed to its liquidation of five corporate credit unions.

Chip Filson, a former NCUA official who blogs on credit union issues, has criticized the wisdom of the NCUA’s liquidation of those corporates. He has noted that the losses the NCUA projected never materialized, and instead the estates have shown large surpluses.

CU Times sought Filson’s comment regarding Monday’s report. He emailed back comments and questions, which were shared with the NCUA to give them an opportunity to respond. They were:

• The Asset Management Estates (AMEs) “spent $10 million on liquidation expenses in the March quarter of 2022, since there had been virtually none for the year or two before this. Who got paid?”
• “As of March 31, 2022 AME financial update, (the) NCUA estimated the total remaining AMEs’ surplus at $846 million. That was five months ago. There is still $451 million remaining from the March projections. Why is (the) NCUA continuing to slow walk distributions two years after the NGN program ended?”
• “No financial updates or further estimates were provided. For example, in March the Southwest surplus’ projected dividend was $127 million, so why is just $82 million being returned now?”

“The lack of public discussion at the board level or by any other agency personnel responsible for managing these assets is disappointing,” Filson wrote in an email to CU Times. “It falls far short of the public transparency and timely responsibility one would hope the agency would demonstrate in its cooperative regulatory role managing member funds.”