September 2022 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 Asset Management Estates (AMEs), the liquidating agent has compared each AME’s cash to its remaining obligations. This analysis shows that funds are available for a distribution to member capital account (MCA) holders of U.S. Central and Constitution, and paid in capital (PIC) holders of Members United. In addition, NCUA’s regulations permit a liquidating dividend to be paid when a surplus remains after making distribution in full on senior claims. Surplus funds are available to Southwest shareholders in the form of an interim dividend payment. 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 increasing interest rates, 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.

The member capital account distributions for September 2022 (based on June 30, 2022, financial statements) are shown in the chart below. Member capital account holders may receive additional distributions in the future, depending on market conditions and the sale of remaining legacy assets.

The paid in capital account distribution for September 2022 (based on June 30, 2022, financial statements) is shown in the chart below.

The dividend distribution for September 2022 (based on June 30, 2022, financial statements) is shown in the chart below. Member shareholders may receive additional dividends in the future, depending on market conditions and the sale of remaining legacy assets.

The distributions will be remitted via electronic funds transfer (EFT) by September30, 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 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 and Constitution member capital holders of record with the liquidating agent, Members United paid in capital holders of record with the liquidating agent, and Southwest shareholders will receive MCA distributions, PIC distributions, and dividend payments, respectively. After accounting for mergers, purchases and assumptions, and liquidations, over 400 active credit unions and over 1,100 shareholders will receive a distribution.

The four corporate AMEs referenced above have sufficient funds at this time for member capital shares, paid in capital shares, and dividend distributions effective June 30, 2022, with distribution in September 2022. Currently, funds are not available for a distribution to Western. Based on June 2022 financials, Western AME owes funds to the NCUSIF. The table below shows amounts due to the Share Insurance Fund.

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’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 and legal settlements.

The liquidating agent reviews the financial information of each corporate AME every 6 months (after June and December) to determine if cash funds are available for distribution. Notice of that potential is sent out via email to the affected credit unions, using the email address on record with NCUA. Our current projection for eventual payment to each AME can be found on NCUA’s website.

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 and certificate balance at the time of liquidation, not capital balance.

We are making the second interim liquidating dividend to Southwest shareholders in the third quarter of 2022, based on June 30, 2022, financials. The interim dividend is set at 0.9 percent.

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 four 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.

A corporate member capital or paid in capital holder 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 distribution. A capital shareholder 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

Southwest share and certificate shareholders can look at the balance of record on October 31, 2010, per their corporate statement, and multiply that balance using the percent stated to arrive at their estimated dividend. We realize that most affected credit unions might not have this information since it is more than ten years ago. A letter with that information will be mailed in late August to the affected credit unions detailing the specific amount of the dividends. When those funds arrive, they should be noted as a credit to Other Operating Income.

No credit union is required to record an accrual for the distribution or dividend in August, 2022.

For Call Report purposes, if necessary, the member capital distribution should be reported on the Statement of Income and Expense on line item 14 – Other Operating Income. The corresponding receivable should be reported on the Statement of Financial Condition on line item 22f – All Other Assets.

No credit union is required to record an accrual for the distribution or dividend in August, 2022.

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