August 2021 Corporate Capital Credit Union Distributions

NCUA’s 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.¹ 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 showed that funds were available for a distribution to member capital account (MCA) holders of U.S. Central, Members United, and Southwest in August 2021. The 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.

Economic events, including the fallout from COVID-19, impacted 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.

The member capital distributions for August 2021 (based on June 30, 2021, financial statements) are shown in the chart below. Member capital holders may receive additional distributions in the future, depending on market conditions and the sale of remaining legacy assets.

The MCA distributions were remitted via electronic funds transfer (EFT) on August 31, 2021, 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 was needed. If NCUA did have your EFT information or you were unsure, please complete the authorization agreement for EFT payments 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.

U.S. Central, Members United, and Southwest member capital holders of record with the liquidating agent received MCA distributions. After accounting for mergers, purchases and assumptions, and liquidations, over 1,800 active credit unions will receive a distribution.

The three corporate AMEs referenced above have sufficient funds at this time for a member capital distribution effective June 30, 2021, with distribution in August 2021. Currently, funds are not available for a distribution to Western or Constitution capital holders. Based on June 2021 financials, Western and Constitution AMEs owe funds to the NCUSIF. The table below shows amounts due to the Share Insurance Fund.

While Constitution capital holders are not projected to receive a distribution in 2021, the ultimate cumulative projected recovery for Constitution capital holders is 64 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.

The liquidating agent projects an additional distribution to Members United and U.S. Central MCA claim holders in early 2022 based on projected December 31, 2021, financial statements (see table below). These projections are based on planned investment sales scheduled to occur by December 31, 2021. The Liquidating Agent’s projections are point-in-time estimates, subject to change, and largely dependent on the Liquidating Agent’s ability to affect and orderly liquidate post-securitized assets. Southwest MCA holders will have already recovered 100 percent with the August 2021 distribution.

* An interim liquidating dividend payment is anticipated for the former shareholders of Southwest in the first quarter of 2022, based on December 31, 2021 financials.

We anticipate a liquidating dividend (surplus) will remain after all claims are paid for Southwest and Members United. Under 12 U.S.C. §1787(b)(11)(B) any case in which funds remain after all accountholders, creditors, other claimants, and administrative expenses are paid, the liquidating agent shall distribute such funds to the credit union's shareholders. The dividend will be based on the share balance at the time of liquidation, not capital balance.

We anticipate the first interim liquidating dividend to Southwest shareholders will be paid in the first quarter of 2022, based on projected December 31, 2021, financials. The amount of dividend will be determined and communicated after the December 31, 2021, financials are finalized.

Ultimately, we anticipate an interim liquidating dividend to Members United shareholders at some time in the future based on recovery projections.

The timing and amount of future distributions will depend on future performance, the availability of cash through the orderly liquidation of assets, payment of senior claims, and the resolution of the current outstanding lawsuits. Since there are still outstanding capital claims for Members United, we cannot project the distribution date for any liquidating dividends at this time.

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.

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:

Debit:Accounts Receivable$106,150
Credit:Other Operating Income$106,150

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.

For updates and more detailed information, visit these sites:

• Corporate Asset Management Estate Recoveries and Claims;
• NGN Questions and Answers;
• Corporate System Resolutions Costs; and
• NGN Program