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Most CUs 'thrilled' for 2018 stabilization fund rebates, hopeful for more

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Most CUs 'thrilled' for 2018 stabilization fund rebates, hopeful for more

Many credit union leaders say they never expected to recover any of the money their institutions paid into the corporate credit union stabilization fund, so they are delighted at recent news of rebates.

At its Feb. 15 board meeting, the National Credit Union Administration approved a $735.7 million dividend payment from the share insurance fund to be made in the third quarter of 2018. That action came on the heels of the board in September 2017 voting to close the corporate credit union stabilization fund and transfer its assets and liabilities to the share insurance fund.

The topic was on the minds and tongues of many attendees at the Credit Union National Association's Governmental Affairs Conference in Washington this week.

South Burlington, Vt.-based North Country FCU CEO Robert Morgan said in an interview he was pleasantly surprised at the announcement of a 2018 rebate.

"I'm happy to get the money now," he said, "and I think they made the right decision."

During the conference, some estimated that rebates could equate to about 7 basis points of return on assets. For North Country, that would mean roughly $400,000 in 2018.

"That's nothing to sneeze at," Morgan said.

Pentagon FCU President and CEO James Schenck said in an interview that the company, which is the third-largest credit union in the U.S. by assets, estimates that it paid about $95 million into the fund even though it had no exposure to the corporate credit unions. PenFed estimates its 2018 rebate will be between $10 million and $11 million.

"We're hoping this is the first of many years of payments," Schenck said. "My expectation is that they owe the industry future payments in addition to 2018."

The NCUA board at its February meeting sounded uncertain about additional distributions.

In September, the NCUA said there may be anywhere from $600 million to $1.1 billion of potential future distributions in addition to the 2018 payout. But during the Feb. 15 meeting, board member Rick Metsger said only that more dividend payments are possible between now and 2022.

PenFed CFO Denise McGlone agreed that the regulator seemed to back away slightly from the talk of additional dividends.

But NCUA Chairman J. Mark McWatters, speaking at the CUNA conference, said that as risk to the share insurance fund dissipates, the agency "anticipates" the payment of further distributions.

North Country's Morgan said he's somewhat skeptical about that even though the NCUA has publicly stated that it expects to dole out more payments.

"To what degree they'll be able to do future rebates I'm uncertain, although that's their stated plan" he said.

In conjunction with the closing of the stabilization fund, the NCUA said it had to guard against reasonably foreseeable adverse economic conditions, so it raised the normal operating level of the share insurance fund to 1.39% from 1.30%. Paul Mercer, president of the Ohio Credit Union League, said in an interview the group did not agree with that move. "It's been well demonstrated to be effective (at 1.30%)," he said.

Mercer said opinions on the NCUA's approach to the closure of the fund and the payments have been "all over the place" among Ohio credit unions. He said there has been animated discussion on the topic among the state's institutions with passionate opinions. Most of the credit unions are "thrilled" with the announcement of a 2018 payment. A smaller minority is still "disturbed" with the way the process is playing out, he said.

Some in the industry, including the National Association of Federally-Insured Credit Unions, believe the NCUA should be rebating more money.

But Mercer said there is generally "heartfelt appreciation and support" for the direction McWatters and the NCUA is taking on the issue. Mercer said he believes the NCUA has done a responsible job of handling the closure of the fund and has done so in a transparent manner.