September 2023 Corporate Capital 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. 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 paid in capital (PIC) holders of U.S. Central.

Economic events, including 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 paid in capital account distribution for September 2023 (based on June 30, 2023, financial statements) is shown in the chart below.

The distributions will be remitted via electronic funds transfer (EFT) by September 30, 2023, 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 paid in capital holders of record with the liquidating agent will receive payments.

NCUA’s regulations permit capital distributions and liquidating dividends to be paid when a surplus remains after making distribution in full on senior claims. At this time we do not have sufficient cash available after making provision for senior claims to provide a meaningful distribution or dividend payment from Constitution, Members United, Western, or Southwest AMEs. We are continuing work on monetizing the remaining assets to cash and expect to make additional distributions and dividends payments in the future.

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.

No dividends are being paid out in this distribution. 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.

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. While no dividend is being paid at this time, we do anticipate a final dividend distribution in the coming years.

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 paid in capital holder can utilize the paid in capital account (PIC) 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 could make the following journal entry:

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

Since notice of the payment and the payment itself are expected in the same month, no credit union is required to record an accrual for a distribution or dividend in 2023. Any payment received should be posted to other operating income.

For Call Report purposes, if necessary, the member capital distribution should be reported on the Statement of Income and Expense under Other Operating Income. The corresponding receivable (if you have one) should be reported on the Statement of Financial Condition under All Other Assets. If you have received payment, then the posting will be to cash.

No credit union is required to record an accrual for a distribution or dividend in 2023.

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