The NCUA liquidated KAPFCU despite an ongoing court battle in order to protect the assets of the CU's members, the agency said.

NCUA began sending checks to members on Aug. 13, even though the agency and KAPFCU were both scheduled to be in court this week to continue litigating whether to order the agency to stop the liquidation.

"Whenever we liquidate a credit union we are mindful of the responsibility to return funds to members in an expeditious manner," said John McKechnie, NCUA's director of Public and Congressional Affairs. "In this case, as with other liquidations, we were prepared to do that either by transferring the shares to another credit union or paying them directly to the members. Kappa was unwilling to support a share transfer to another institution, and accordingly the NCUA provided the funds directly to the members," he added.

Both parties were scheduled to appear before U.S. District Judge Emmet Sullivan at 10:00 am on Aug. 18, but the parties have jointly asked the hearing be postponed until September.