Distribution of nearly $736 million in excess funds from the federal program that insures savings in credit unions is being calculated now – through preforming and validating of the data necessary – with an anticipated payout on target for the third quarter of the year, the chairman of the National Credit Union Administration (NCUA) indicated Monday.
He also indicated that more distributions may be coming.
In the footnotes of a speech he delivered to a conference of the Credit Union National Association (CUNA) in Washington, D.C., NCUA Board Chairman J. Mark McWatters wrote that checks for the distribution would be issued in the third quarter. However, he wrote that NCUA “cannot vouch for the accuracy of any estimated share insurance distribution provided by another organization.”
He added that NCUA “expects to notify credit unions later this year of their respective distribution amount.”
In other footnotes to his speech, McWatters summarized the impact of the $736 million distribution from the National Credit Union Share Insurance Fund (NCUSIF). The distribution represents the amount of money in the reserves above the insurance fund’s “normal operating level” of total reserves to savings insured of 1.39%. The fund exceeded that level after incorporating the remaining funds in the Temporary Corporate Credit Union Stabilization Fund (TCCUSF), which was closed last summer.
“In a nutshell, the early closing of the Stabilization Fund transformed a projected premium assessment into an anticipated distribution while materially increasing the necessary and appropriate GAAP reserves for potential future Share Insurance Fund losses and maintaining a normal operating level necessary to protect the Share Insurance Fund’s equity ratio from falling below 1.20 percent in a moderate recession as determined by stress test analysis conducted pursuant to Federal Reserve methodology,” McWatters wrote.
In his spoken remarks, the NCUA chairman indicated that the distribution planned for later this year may not be the only one ahead for credit unions.
“As the risk to the Share Insurance Fund dissipates from the retirement of the NGN Notes [NCUA Guaranteed Notes], we anticipate the payment of further distributions,” he told the group. The NGNs are based on “legacy assets” from five closed corporate credit unions; NCUA issued the notes in 2010 to help resolve the failing institutions. According to NCUA, the notes consist of more 2,000 investment securities, secured by approximately 1.6 million residential mortgages, as well as commercial mortgages and other securitized assets.
NCUA issued approximately $28.3 billion in notes, backed by the cash flows from the Legacy Assets. “The timely repayment of principal and interest to the investors in NGNs is guaranteed by the NCUA and backed by the full faith and credit of the United States,” according to NCUA.
In other remarks, McWatters:
- Cited accomplishments achieved with “bipartisanship” between himself (a Republican) and fellow Board Member Rick Metsger (a Democrat), including the distribution from the insurance fund and closing of the Stabilization Fund;
- Noted the agency’s restructuring from five regions into three, expected by next January, and “eliminating 80% of the agency’s leased space”;
- Outlined the agency’s participation in President Donald Trump’s Executive Order 13777 directing agencies to set up task forces to identify outdated and unnecessary rules and regulations;
- Pointed to the agency’s public briefing on its proposed budget and the agency’s requests for comments on its budget, plans for improving the Call Report, and methods and procedures for electronic data collection as examples of the agency being “transparent and accountable” and working to craft “tailored and targeted rules and guidance.”