NCUA Begins Distributing Share Insurance Dividends to Credit Unions

7/24/18

NCUA headquarters in Alexandria, Va.

The National Credit Union Administration has begun paying dividends for more than 5,700 institutions eligible for the $735.7 million Share Insurance distribution.

Statements were mailed last week to dividend recipients indicating the amounts they will receive. An institution that filed a quarterly Call Report as a federally insured credit union for at least one reporting period in calendar year 2017 will be eligible for a pro rata distribution.

The dividends are possible because NCUA merged the share insurance fund and the corporate stabilization fund.

“Credit unions will leverage the distribution to the benefit of their members,” said John Trull, Northwest Credit Union Association AVP, Regulatory Advocacy. “The Association will monitor the performance of the legacy assets and will hold the NCUA board accountable. We anticipate there will be future distributions.”

Mid Oregon Federal Credit Union expects to get back $139,000. The credit union hasn’t identified a specific use for the funds, but the dividends were anticipated and included in Mid Oregon’s 2018 budget.

“We are growing rapidly and will most likely use the funds to support the growth,” said Kevin Cole, Chief Financial Officer for Mid Oregon. “The growth is driving our need for new staff and improvements in the Mid Oregon infrastructure in the IT area.”

“When the corporate stabilization program was announced there was some concern in the industry that NCUA (and most other people) were overestimating the magnitude and duration of the losses,” Cole explained. “The performance of the NCUA Guaranteed Notes has shown the losses were not as bad as originally estimated. I think the final outcome for credit unions won’t really be known until the guaranteed notes pay off and some credit unions receive a return of some corporate credit union capital that was lost. For many credit unions the losses on corporate credit union capital were more damaging than the NCUSIF assessments. The amount of capital that could be returned to credit unions in that scenario would be material and may present some great opportunities for credit unions.”

The NCUA’s prudent management of the corporate resolution process provided the ability to close the Stabilization Fund four years early, said NCUA Board Chairman J. Mark McWatters.

“Through a collaborative, bipartisan process among the Board members and a great deal of diligent work by staff, the NCUA has been able to avoid a premium assessment and safely distribute funds to credit unions that can be put to work building local communities, creating new businesses, and improving the lives of members across the country while advancing the objectives of protecting member deposits and maintaining a safe and sound credit union system.”

The NCUA Board gave unanimous approval to the distribution at its February 2018 open meeting. The distribution was possible after the Board voted unanimously at its September 2017 open meeting to close the Temporary Corporate Credit Union Stabilization Fund and transfer the Stabilization Fund’s assets and obligations to the National Credit Union Share Insurance Fund, as required by law.

More information on the Share Insurance distribution, including the method the NCUA used to determine each institution’s share, can be found online here. Information about the Stabilization Fund closure, the transfer of assets and obligations to the Share Insurance Fund, and setting the Share Insurance Fund’s normal operating level at 1.39 percent are all available here.

Prior to the Board’s actions in September 2017 and February 2018, the Stabilization Fund was scheduled to expire in 2021. Net legal recoveries of more than $3.8 billion won by the NCUA on behalf of five failed corporate credit unions decreased the costs to the Stabilization Fund and made funds available for this distribution.

Posted in NCUA.