SHREWSBURY, N.J. — The planned merger of WesCorp with VolCorpincluded a capital payout plan whereby WesCorp would returnVolCorp's member capital over a 20-year period, but an NCUA lettercaused the corporates to go back to the drawing board.

Back in March NCUA's Office of Corporate Credit Unions advisedcorporates that the OCCU would be “reluctant to recommend” approvalto the NCUA Board of merger applications that contain a payout ofretained earnings in any form. “The recent trend in several mergernegotiations, to include a payout of the merging corporate creditunion's retained earnings, does not promote the objective ofincreasing retained earnings in the corporate system,” NCUAwrote.

WesCorp and VolCorp have found a way to meet the OCCU's wishes,said Todd Lane, WesCorp's executive vice president and chieffinancial officer. WesCorp is effectively changing the payout awayfrom a capital instrument to an expense item. WesCorp will payVolCorp members a dividend each quarter based on a notional amountover the same 20-year period. The notional amount will be based onthe surplus above VolCorp's 2.25% reserves and undivided earningsat the time of merger. Based on VolCorp's current RUDE, the surplusshould be about $5 to $6 million, with WesCorp paying outapproximately $26 million over 20 years.

WesCorp expects the merger to close by the end of June.–[email protected]