ALEXANDRIA, Va.–A date long-awaited by many credit union leaders that for many years had seemed so far away is now almost here, and it’s going to mean a payout for a number of credit unions.
As one NCUA board member recently noted, he’s “surprised” more credit unions aren’t aware of the potential distribution coming their way.
When the NCUA board holds its meeting today it will receive an update on oversight of the Guaranteed Notes Oversight Program, otherwise better known as the NGNs. It was one of a number of steps and new programs created in the wake of the financial crisis of 2007-08 that would eventually claim five failed corporate credit unions: Kansas-based U.S. Central; California-based Western Corporate (Wescorp); Illinois-based Members United Corporate FCU; Texas-based Southwest Corporate FCU, and Connecticut-based Constitution Corporate.
In 2008, NCUA created the Temporary Corporate Credit Union Liquidity Guarantee Program to provide a full faith and credit guarantee of the timely payment of principal and interest on certain unsecured debt of participating corporate credit unions.
In 2010, the agency introduced the Corporate System Resolution Program, with a goal of stabilizing the corporate credit union system and providing short-term and long-term funding to resolve a portfolio of residential mortgage-backed securities, commercial mortgage-backed securities, as well as other asset-backed securities and corporate bonds held by the failed corporate credit unions.
With the creation of each new program credit unions were told they would have to pay in, but the payout was anything but assured and a long way off.
Potential for $9-Billion Assessment
At the time the Corporate Resolution program was put in place a decade ago, NCUA and Black Rock, the independent securities valuation firm it retained, said the potential assessment tab could be as high as $9.2 billion. The assessment never reached the high end, but credit unions would eventually pay nearly $5 billion into the Temporary Corporate CU Stabilization Fund (TCCUSF).
In 2010, NCUA finalized the first NCUA Guaranteed Note sale. The NCUA Guaranteed Notes program was designed to provide long-term funding for billions of dollars of legacy assets formerly held in the securities portfolios of the failed corporate credit unions.
Over the decade that followed and under five different NCUA chairman—Michael Fryzel, Debbie Matz, Rick Metsger, J. Mark McWatters, and now Rodney Hood, credit unions continued to hear one date: “2021.” That was the year credit unions were told would be the earliest they could expect to see any type of payout from the TCCUSF, as well as the year credit unions could expect to see any type of payout or rebate on the NCUA Guaranteed Notes.
2021 came early for the TCCUSF payout. In 2018, due to a better-then-expected performance of its portfolio as well as multi-billion-dollar legal settlements, the agency paid out dividends to 5,700 credit unions totaling $735.7 million.
2021 Is Nearly Here
Now, 2021 is approaching, and the payout on the NCUA Guaranteed Notes will likely be larger than the TCCUSF payout, although funds will flow only to certain credit unions. That’s the update members of the NCUA board will hear today.
One of those board members, J. Mark McWatters, recently wrote in CUToday.info he has been “surprised to learn that some credit union leaders were not aware that the NCUA, hopefully, is nearing the point where it will begin remitting distributions to former members of the failed corporate credit unions. Although this is not proprietary information and is disclosed on the agency’s website, it does not jump off the page and, as such, merits further discussion.”
McWatters pointed out that on page four of “Corporate Asset Management Estates Recoveries and Claims, as of 12/31/2019” found on the NCUA website here, is outlined the potential future distributions from the Asset Management Estates of the five failed corporates.”
Specific Payouts
Specifically, noted McWatters:
- Item B7 notes the following Projected Repayments of Membership Capital: U.S. Central, $1.666 billion; Members United, $493 million; Southwest, $404 million, and Constitution, $36 million
J. Mark McWatters
- Item B9 notes the following Projected Repayments of Paid in Capital: Members United, $79 million
- In addition, the following Potential Liquidating Dividends are projected: Members United, $16 million; and Southwest, $299 million
McWatters reminded those amounts were projected as of Dec. 31, 2019 and, of course, may change before any distributions are actually remitted.
“In any event, these projected distributions will most likely exceed the distributions made from the merger of the Temporary Corporate Credit Union Stabilization Fund (TCCUSF) into the National Credit Union Share Insurance Fund,” McWatters said.
No Payout
Member credit unions of two former corporates will not see any payout: Wescorp, which in 2011 was merged into the newly created Catalyst Corporate FCU (the former Southwestern Corporate and Georgia Corporate FCU, which were merged), and the so-called “corporate’s corporate,” U.S. Central.
CUToday.info will have full coverage from today’s NCUA board meeting.