NCUA ANNOUNCES ANOTHER $395 MILLION IN DISTRIBUTION FROM THE CORPORATE SYSTEM RESOLUTION PROGRAM AS THE CORPORATE CRISIS PAYBACKS NEAR $3 BILLION TOTAL

As we are now over a decade since the Great Recession of 2008-2010 and the resultant corporate credit union losses from investments that were regulatorily authorized but not properly rated by the rating agencies, NCUA is nearing the end of its role as the administrator of the Corporate System Resolution Program which was established to manage and recover as many as possible of the capital losses credit unions took from the corporate write-downs and – in some cases – closures and/or restructures.

However, the pay backs – while dwindling over time as the biggest recoveries have already taken place from legal actions and settlements over the past ten years – are continuing.

Another Corporate System Resolution Program distribution was announced today.

In today’s press release, NCUA, in its role as liquidating agent, announced a $313 million distribution to more than 400 membership and paid in capital shareholders of the former Members United, Constitution, and U.S. Central corporate credit unions. NCUA will also distribute $82 million in dividends to more than 1,100 shareholders of Southwest Corporate. NCUA completed capital distributions to Southwest Corporate capital holders last year.

The distributions are scheduled to be paid to the applicable credit unions in September 2022.

As liquidating agent of the former corporate credit unions’ asset management estates, the NCUA has previously made four rounds of distributions.

In 2020, 2021, and the first quarter of 2022, distributions were made to capital holders of Southwest, Members United, Constitution, and U.S. Central.  With this fifth distribution announced today, the NCUA will have returned more than $2.6 billion to former membership and paid-in capital shareholders of corporate credit unions and almost $292 million in dividends to shareholders.

While there will always be debate over the supervisory actions NCUA took or didn’t take in the years before the corporate crisis and whether the corporates themselves took too much risk onto their balance sheets, there can be little question that NCUA has done a good job of managing the Corporate System Resolution Program and generating much more in recoveries that anyone could have ever imagined in 2010.

Today’s announcement will be welcome news for the third quarter 2022 numbers at those of you who lost paid-in capital and/or dividends on your paid-in capital at what was then known as Southwest, Members United, Constitution, and US Central corporate credit unions.

The corporate crisis, as it was called, was not a pleasant time in credit union industry history.  However, today as we look back through the rear-view mirror, we can see how NCUA, the US Treasury Department, Congress, and the credit union community itself managed to work together to establish a program that – although it has taken over a decade – enables credit unions to continue to rightfully claim that the taxpayers have never had to bail out America’s credit unions.

Yes, Treasury backed bond guarantees helped make this happen.  But the final results are much more positive than the harsh critics and naysayers were predicting in 2010-2012.  The Treasury was paid back, in less than full term, and credit unions are being made more whole for their capital losses.

There may be one, or possibly two, much smaller distributions to come in the next few years.  But this period in credit union history is about to become a chapter closed with a much happier ending than many imagined.

Until next time.

Dennis Dollar