Some 2,000 credit unions with capital accounts in three failed corporate credit unions – U.S. Central Federal Credit Union, Members United Corporate FCU, and Southwest Corporate FCU – are slated to receive their share of an aggregate distribution of $368.7 million in April, the National Credit Union Administration (NCUA) said Thursday.
These three corporates and two others – Western Corporate FCU (WesCorp) and Constitution Corporate FCU – failed largely under the weight of their investment in underwater residential mortgage-backed securities amid the financial downturn that began about 2007. The distribution planned this April will come out of the asset management estates of the three corporates. The approved distribution amount, a staff presentation showed, includes $150 million to holders of U.S. Central capital; $126.2 million to holders of Members United capital; and $92.5 million to holders of Southwest capital.
The NCUA said that the U.S. Central, Members United, and Southwest asset management estates collectively have about 2,600-member capital account holders, mostly credit unions, with a total claim of $2.5 billion. “After accounting for mergers, purchases and acquisitions, and liquidations, about 2000 active credit unions will receive a distribution,” the agency stated. It noted this will also be the second distribution to the member capital holders of Southwest since July 2020.
The agency said it plans to send letters to distribution recipients notifying them of their distribution amount and other payment details, and distribution will be made generally through an electronic funds transfer. “The NCUA will work with each non-credit union recipient to ensure timely receipt of the payout,” the agency added.
The planned payout was discussed during a staff presentation Thursday to the NCUA Board on the agency’s NCUA Guaranteed Notes (NGN) program. That program packaged selected securities held by the failed corporates for sale on the secondary market to minimize losses to corporate credit union members and, ultimately, the National Credit Union Share Insurance Fund (NCUSIF).