Chartering and Field of Membership for Federal Credit Unions, 36257-36270 [2010-15130]
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Rules and Regulations
Federal Register
Vol. 75, No. 122
Friday, June 25, 2010
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NATIONAL CREDIT UNION
ADMINISTRATION
12 CFR Part 701
RIN 3133–AD65
Chartering and Field of Membership
for Federal Credit Unions
AGENCY: National Credit Union
Administration (NCUA).
ACTION: Final rule.
SUMMARY: NCUA is amending its
chartering and field of membership
manual to update its community
chartering policies. These amendments
include using objective and quantifiable
criteria to determine the existence of a
local community and defining the term
‘‘rural district.’’ The amendments clarify
NCUA’s marketing plan requirements
for credit unions converting to or
expanding their community charters
and define the term ‘‘in danger of
insolvency’’ for emergency merger
purposes.
DATES:
The rule is effective July 26,
2010.
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FOR FURTHER INFORMATION CONTACT:
Michael J. McKenna, Deputy General
Counsel; John K. Ianno, Associate
General Counsel; Frank Kressman, Staff
Attorney, Office of General Counsel, or
Robert Leonard, Program Officer, Office
of Examination and Insurance, 1775
Duke Street, Alexandria, Virginia 22314
or telephone (703) 518–6540 or (703)
518–6396.
SUPPLEMENTARY INFORMATION:
A. Background and Summary of Final
Action
In 1998, Congress passed the Credit
Union Membership Access Act
(‘‘CUMAA’’) and reiterated its
longstanding support for credit unions,
noting that they ‘‘have the specif[ic]
mission of meeting the credit and
savings needs of consumers, especially
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persons of modest means.’’ Public Law
105–219, § 2, 112 Stat. 913 (August 7,
1998). The Federal Credit Union Act
(‘‘FCU Act’’) grants the NCUA Board
broad general rulemaking authority over
Federal credit unions. 12 U.S.C. 1766(a).
In passing CUMAA, Congress amended
the FCU Act and specifically delegated
to the Board the authority to define by
regulation the meaning of a ‘‘welldefined local community’’ (WDLC) and
rural district for Federal credit union
charters. 12 U.S.C. 1759(g).
The Board continues to recognize two
important characteristics of a WDLC.
First, there is geographic certainty to the
community’s boundaries, which must
be well-defined. Second, there is
sufficient social and economic activity
among enough community members to
assure that a viable community exists.
Since CUMAA, NCUA has expressed
this latter requirement as ‘‘interaction
and/or shared common interests.’’
NCUA Chartering and Field of
Membership Manual (Chartering
Manual), Interpretive Ruling and Policy
Statement (IRPS) 08–2, Chapter 2,
V.A.1.
The Board has gained broad
experience in determining what
constitutes a WDLC by analyzing
numerous applications for community
charter conversions and expansions. In
this process, the Board has exercised its
regulatory judgment in determining
whether, in a particular case, a WDLC
exists. This involves applying its
expertise to the question of whether a
proposed area has a sufficient level of
interaction and/or shared common
interests to be considered a WDLC.
With the benefit of having received
public comments to a proposal to
amend NCUA’s community chartering
rules issued in May 2007, NCUA issued
a substitute proposal in December 2009.
72 FR 30988 (June 5, 2007), 74 FR 68722
(December 29, 2009). Some provisions
of the May 2007 proposal were
incorporated into the 2009 proposal
without change, while others were
modified or eliminated.
NCUA received comments on the
2009 proposal from 44 commenters
including 23 credit unions, 20 credit
union trade associations, and 1 bank
trade association. The commenters
generally commended NCUA for
addressing the difficult issues that are
the subject of the proposal. The banking
trade association opposed the proposal
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in general. All commenters offered some
suggested revisions to the proposal.
As discussed more fully below, the
following aspects of the 2009 proposal
will be finalized without change: (1)
The treatment of single political
jurisdictions (SPJs); (2) the elimination
of the narrative approach; (3) the
grandfathering of previously approved
WDLCs; (4) the treatment of
underserved areas; (5) the ability to
serve analysis and marketing plan
requirements; and (6) the definition of
‘‘in danger of insolvency.’’
As a result of further deliberations
and consideration of the public
comments, NCUA is making final
amendments to: (1) the criteria required
for establishing a multiple political
jurisdiction WDLC, and (2) the
definition of ‘‘rural district.’’ These
adjustments fine tune NCUA’s
chartering policies to balance enabling
an FCU to fulfill its mission to provide
reasonably priced financial services to
qualifying members with NCUA’s need
to comply with the statutory provisions
in the FCU Act. Both adjustments will
make the chartering policies more
practical.
B. Overview of December 2009 Proposal
and Section-By-Section Analysis
1. Well Defined Local Communities
In the proposal, NCUA noted it
believed it continues to be prudent
policy to consider SPJs and statistical
areas, as those terms are described more
fully below, as WDLCs because they
meet reasonable objective and
quantifiable standards. SPJs were
treated the same in the 2009 proposal as
in the 2007 proposal. Statistical areas,
however, were treated somewhat
differently in the 2009 proposal from
how they were treated in the 2007
proposal. In the 2009 proposal, NCUA
added an additional criterion an
applicant must meet to establish that a
statistical area with multiple
jurisdictions is a WDLC. Specifically,
that additional criterion limits a
multiple jurisdiction WDLC’s
population to 2.5 million or less people,
as discussed further below.
a. WDLCs
i. Single Political Jurisdictions
The FCU Act provides that a
‘‘community credit union’’ consists of
‘‘persons or organizations within a welldefined local community,
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neighborhood, or rural district.’’ 12
U.S.C. 1759(b)(3). The FCU Act
expressly requires the Board to apply its
regulatory expertise and define what
constitutes a WDLC. 12 U.S.C. 1759(g).
It has done so in the Chartering Manual,
Chapter 2, Section V, Community
Charter Requirements. In 2003, the
Board, after issuing notice and seeking
comments, issued IRPS 03–1 that stated
any county, city, or smaller political
jurisdiction, regardless of population
size, is by definition a WDLC. 68
FR18334, 18337 (Apr. 15, 2003). An
entire state is not acceptable as a WDLC.
Under this definition, no documentation
demonstrating that the political
jurisdiction is a WDLC is required.
After many years of experience, the
Board has reviewed this definition of
WDLC and still finds it compelling. The
Board finds that a single governmental
unit below the State level is welldefined and local, consistent with the
governmental system in the United
States consisting of a local, State, and
Federal government structure. An SPJ
also has strong indicia of a community,
including common interests and
interaction among residents. Local
governments by their nature generally
must provide residents with common
services and facilities, such as
educational, police, fire, emergency,
water, waste, and medical services.
Further, an SPJ frequently has other
indicia of a WDLC such as a major trade
area, employment patterns, local
organizations and/or a local newspaper.
Such examples of commonalities are
indicia that SPJs are WDLCs where
residents have common interests and/or
interact.
About a third of the commenters
supported NCUA continuing to treat an
SPJ as a presumed WDLC. The bank
trade association opposed that
treatment. NCUA agrees that an SPJ, less
than an entire state, by its very nature
has sufficient indicia of interaction to
continue to be treated as a WDLC in the
final rule.
ii. Statistical Areas
The Board proposed to establish a
statistical definition of WDLC in cases
involving multiple political
jurisdictions. In that context, a
geographically certain area would be
considered a WDLC when the following
four requirements are met: (1) The area
is a recognized core based statistical
area (CBSA), or in the case of a CBSA
with Metropolitan Divisions, the area is
a single Metropolitan Division; (2) the
area contains a dominant city, county or
equivalent with a majority of all jobs in
the CBSA or in the metropolitan
division; (3) the dominant city, county
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or equivalent contains at least 1⁄3 of the
CBSA’s or Metropolitan Division’s total
population; and (4) the area has a
population of 2.5 million or less people.
The Board’s experience has been that
WDLCs can come in various population
and geographic sizes. While the
statutory language ‘local community’
does imply some limit, Congress has
directed NCUA to establish a regulatory
definition consistent with the mission of
credit unions. While SPJs below the
state level meet the definition of a
WDLC, nothing precludes a larger area
comprised of multiple political
jurisdictions from also meeting the
regulatory definition. There is no
statutory requirement or economic
rationale that compels the Board to
charter only the smallest WDLC in a
particular area.
The Board’s experience has been that
applicants have the most difficulty in
preparing applications involving larger
areas with multiple political
jurisdictions. This is because, as the
population and the geographic area
increase and multiple jurisdictions are
involved, it can be more difficult to
demonstrate interaction and/or shared
common interests. This often causes
some confusion to the applicant about
what evidence is required and what
criteria are considered to be most
significant under such circumstances.
The current chartering manual
provides examples of the types of
information an applicant can provide
that would normally evidence
interaction and/or shared common
interests. These include but are not
limited to: (1) Defined political
jurisdictions; (2) major trade areas; (3)
shared common facilities; (4)
organizations within the community
area; and (5) newspapers or other
periodicals about the area.
These examples are helpful but the
Board’s experience is that very often in
situations involving multiple
jurisdictions, where it has determined
that a WDLC exists, interaction or
common interests are evidenced by a
major trade area that is an economic
hub, usually a dominant city, county or
equivalent, containing a significant
portion of the area’s employment and
population. This central core often acts
as a nucleus drawing a sufficiently large
critical mass of area residents into the
core area for employment and other
social activities such as entertainment,
shopping, and educational pursuits. By
providing jobs to residents from outside
the dominant core area, it also provides
income that then generates further
interaction both in the hub and in
outlying areas as those individuals
spend their earnings for a wide variety
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of purposes in outlying counties where
they live. This commonality through
interaction and/or shared common
interests in connection with an
economic hub is conducive to a credit
union’s success and supports a finding
that such an area is a local community.
The Board views evidence that an
area is anchored by a dominant trade
area or economic hub as a strong
indication that there is sufficient
interaction and/or common interests to
support a finding of a WDLC capable of
sustaining a credit union. This type of
geographic model greatly increases the
likelihood that the residents of the
community manifest a ‘‘commonality of
routine interaction, shared and related
work experiences, interests, or activities
* * *’’ that are essential to support a
strong healthy credit union capable of
providing financial services to members
throughout the area. Public Law 105–
219, § 2(3), 112 Stat. 913 (August 7,
1998).
The Office of Management and Budget
(OMB) publishes the geographic areas
its analysis indicates exhibit these
important criteria. The Board is familiar
with and has utilized these statistics. In
over six years, the agency has approved
in excess of 50 community charters
involving metropolitan statistical areas
(MSAs), usually involving a community
based around a dominant core trade
area.
The Board noted that when statistics
can demonstrate the existence of such
relevant characteristics it is appropriate
to presume that sufficient interaction
and/or common interests exist to
support a viable community based
credit union. In such situations, the area
will meet the regulatory definition of a
WDLC.
Certain areas, however, do not have
one dominant economic hub, but rather
may contain two or more dominant
hubs. These situations diminish the
persuasiveness of the evidence and
make it inappropriate to automatically
conclude that they qualify as WDLCs.
On December 27, 2000, OMB
published Standards for Defining MSAs
and micropolitan statistical areas
(MicroSAs). 65 FR 82228 (December 27,
2000). The following definitions
established by OMB are relevant here:
CBSA—‘‘A statistical geographic
entity consisting of the county or
counties associated with at least one
core (urbanized area or urban cluster) of
at least 10,000 population, plus adjacent
counties having a high degree of social
and economic integration with the core
as measured through commuting ties
with the counties containing the core.
Metropolitan and Micropolitan
Statistical Areas are the two categories
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of Core Based Statistical Areas.’’ 65 FR
82238 (Dec. 27, 2000).
Metropolitan Division—‘‘A county or
group of counties within a Core Based
Statistical Area that contains a core with
a population of at least 2.5 million.’’ 65
FR 82238 (Dec. 27, 2000). OMB
recognizes that Metropolitan Divisions
often function as distinct, social,
economic, and cultural areas within a
larger MSA. See OMB Bulletin NO. 07–
01, December 18, 2006.
Metropolitan Statistical Area—‘‘A
Core Based Statistical Area associated
with at least one urbanized area that has
a population of at least 50,000. The
Metropolitan Statistical Area comprises
the central county or counties
containing the core, plus adjacent
outlying counties having a high degree
of social and economic integration with
the central county as measured through
commuting.’’ 65 FR 82238 (Dec. 27,
2000).
Micropolitan Statistical Area—‘‘A
Core Based Statistical Area associated
with at least one urban cluster that has
a population of at least 10,000, but less
than 50,000. The Micropolitan
Statistical Area comprises the central
county or counties containing the core,
plus adjacent outlying counties having a
high degree of social and economic
integration with the central county as
measured through commuting.’’ 65 FR
82238 (Dec. 27, 2000).
Demonstrated commuting patterns
supporting a high degree of social and
economic integration are a very
significant factor in community
chartering, particularly in situations
involving large areas with multiple
political jurisdictions. In a community
based model, significant interaction
through commuting patterns into one
central area or urban core strengthens
the membership of a credit union and
allows a community based credit union
to efficiently serve the needs of the
membership throughout the area. Such
data demonstrates a high degree of
interaction through the major life
activity of working and activities
associated with employment. Large
numbers of residents share common
interests in the various economic and
social activities contained within the
core economic area.
Historically, commuting has been an
uncomplicated method of
demonstrating functional integration.
NCUA agrees with OMB’s conclusion
that ‘‘Commuting to work is an easily
understood measure that reflects the
social and economic integration of
geographic areas.’’ 65 FR 82233 (Dec. 27,
2000). The Board also finds compelling
OMB’s conclusion that commuting
patterns within statistical areas
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demonstrate a high degree of social and
economic integration with the central
county. OMB’s threshold for qualifying
a county as an outlying county eligible
for inclusion in either a MSA or
MicroSA is a threshold of 25% intercounty commuting. OMB also considers
a multiplier effect (a standard method
used in economic analysis to determine
the impact of new jobs on a local
economy) that each commuter would
have on the economy of the county in
which he or she lives and notes that a
multiple of two or three generally is
accepted by economic development
analysts for most areas. 65 FR 82233
(Dec. 27, 2000). ‘‘Applying such a
measure in the case of a county with the
minimum 25 percent commuting
requirement means that the incomes of
at least half of the workers residing in
the outlying county are connected either
directly (through commuting to jobs
located in the central county) or
indirectly (by providing services to local
residents whose jobs are in the central
county) to the economy of the central
county or counties of the CBSA within
which the county at issue qualifies for
inclusion.’’ 65 FR 82233 (Dec. 27, 2000).
OMB has pointed out that a Federal
agency using OMB’s statistical
definitions is responsible for ensuring
that the definitions are appropriate for
its particular use. NCUA is confident,
based on its experience, that it is using
OMB’s statistical definitions in an
appropriate manner.
The Board continues to favor the
establishment of a standard statistical
definition of a WDLC. The Board
believes that the application of strictly
statistical rules for determining whether
a CBSA is a WDLC has the advantage of
minimizing ambiguity and making the
application process less time
consuming. In addition to finding
evidence established in this manner
compelling, the Board believed that the
reasonableness of the conclusion is
further strengthened when additional
factors establishing the dominance of
the core area are present.
As OMB has noted, Metropolitan
Divisions often function as distinct
social, economic, and cultural areas. In
the Board’s view, this evidence detracts
from the cohesiveness of a CBSA with
Metropolitan Divisions. Accordingly,
under the proposal, a CBSA with
Metropolitan Divisions does not meet
the definition of a WDLC. Individual
Metropolitan Divisions within the CBSA
could qualify as a WDLC. Similarly, the
Board believes that when multiple
political jurisdictions are present, an
overly large population can detract from
the cohesiveness of a geographic area.
For that reason, the Board proposed
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capping a multijurisdictional area at 2.5
million or less people in order to qualify
as a WDLC. The Board chose that
population threshold because OMB
generally designates a Metropolitan
Division within a CBSA that has a core
of at least 2.5 million people. The Board
takes that established threshold as a
logical breaking point in terms of
community cohesiveness with respect to
a multijurisdictional area.
Also, the Board acknowledged that
not all areas of the country are the same
and there may be a CBSA that does not
contain a sufficiently dominant core
area or contains several significant core
areas. Such situations also dilute the
cohesiveness of a CBSA. For these
reasons, the Board proposed to require
that a CBSA contain a dominant core
city, county, or equivalent that contains
the majority of all jobs and 1⁄3 of the
total population contained in the CBSA
in order to meet the definition of a
WDLC. These additional requirements
were intended to assure that the core
area dominates any other area within
the CBSA with respect to jobs and
population. Information about the
current definitions of CBSAs is available
at OMB’s Internet site (https://
www.whitehouse.gov/omb). Community
charter applications for part of a CBSA
are acceptable provided they include
the dominant core city, county, or
equivalent and the CBSA’s population
in its entirety is 2.5 million or less
people.
Accordingly, the Board proposed in
2009 to establish a statistical definition
of WDLC in cases involving multiple
political jurisdictions. Specifically, the
proposal stated that a geographically
well defined area will be considered a
WDLC in that context when the
following four requirements are met:
• The area must be a recognized
CBSA, or in the case of a CBSA with
Metropolitan Divisions the area must be
a single Metropolitan Division; and
• The area must contain a dominant
city, county or equivalent with a
majority of all jobs in the CBSA or
Metropolitan Division; and
• The dominant city, county or
equivalent must contain at least 1⁄3 of
the CBSA’s or Metropolitan Division’s
total population; and
• The area must have a population of
2.5 million or less people.
As previously mentioned, NCUA
believes this more objective approach
will benefit all involved by making the
application and review process faster,
simpler, and less labor intensive, and
will provide a more certain outcome.
Also, using objective criteria as the basis
for granting a community charter will
help ensure that NCUA makes
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consistent and uniform decisions from
regional office to regional office.
About a third of the commenters
stated that an FCU should not have to
meet all four statistical criteria to
establish a WDLC in areas containing
multiple political jurisdictions and
believed these criteria are too restrictive
and exclude too many true communities
from qualifying as WDLCs. About half of
these commenters suggested that
satisfying two of the four criteria should
be sufficient to establish a WDLC while
others suggested substitute criteria. A
handful of commenters suggested that
other areas such as MSAs and
congressional districts could also serve
as presumed WDLCs. A third of the
commenters opposed the 2.5 million
person population cap on multiple
political jurisdiction WDLCs. They
thought it was too restrictive.
Upon further consideration, NCUA
agrees that requiring compliance with
all four of the proposed criteria is overly
restrictive and beyond statutory
requirements. More specifically, NCUA
believes it is unnecessary to include the
employment and population
requirements.
NCUA is confident in and agrees with
OMB’s extensive scientific methodology
employed in defining a CBSA and in
concluding that the existence of a CBSA
demonstrates a high degree of social and
economic integration in a particular
geographic area. Accordingly, NCUA
believes that including the majority of
population and one third of
employment statistical criteria to
establish a WDLC in areas containing
multiple political jurisdictions is overly
restrictive. NCUA has concluded after
much deliberation that the majority of
population and one third of
employment criteria are unnecessary,
exceed statutory requirements, and that
a CBSA by definition, even without
those additional criteria, is sufficient to
demonstrate the requisite social and
economic integration needed to
establish a WDLC capable of supporting
a viable credit union. NCUA still
believes, however, that any portion of a
CBSA chosen as the geographic area of
the community must still contain the
core of the CBSA and that a total
population cap of 2.5 million is
appropriate in a multiple political
jurisdiction context to demonstrate
cohesion in the community. Those are
also consistent with OMB guidance.
Accordingly, the final rule eliminates
the majority of population and one third
of employment criteria from the
statistical definition of a WDLC.
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2. Narrative Approach
As previously mentioned, NCUA
stated in the proposal that it does not
believe it is beneficial to continue the
practice of permitting a community
charter applicant to provide a narrative
statement with documentation to
support the credit union’s assertion that
an area containing multiple political
jurisdictions meets the standards for
community interaction and/or common
interests to qualify as a WDLC. As
noted, the narrative approach is
cumbersome, difficult for credit unions
to fully understand, and time
consuming. Accordingly, NCUA
proposed eliminating, from the
community chartering process, the
narrative approach and all related
aspects of that procedure.
While not every area will qualify as a
WDLC under the statistical approach,
NCUA stated it believes the consistency
of this objective approach will enhance
its chartering policy, assure the strength
and viability of community charters,
and greatly ease the burden for any
community charter applicant.
Well over half of the commenters
opposed eliminating in its entirety the
narrative method of establishing a
WDLC. Some of those commenters
supported using a narrative as
supplemental evidence to the statistical
criteria. Others would like FCUs to have
the choice of establishing a WDLC using
either the narrative or the statistical
criteria. NCUA continues to believe the
narrative approach should be eliminated
for the reasons outlined above and is no
longer available in the final rule.
3. Grandfathered WDLCs
NCUA stated in the proposal that an
area previously approved by NCUA as a
WDLC, prior to the effective date of any
final amendments, will continue to be
considered a WDLC for subsequent
applicants who wish to serve that exact
geographic area. After that effective
date, an applicant applying for a
geographic area that is not exactly the
same as the previously approved WDLC
must comply with the Chartering
Manual’s WDLC criteria then in place.
Over a third of the commenters noted
their support for NCUA’s decision to
grandfather all previously approved
WDLCs. The banking trade group
opposed that position. Previously
approved WDLCs were established as
such under legally appropriate
standards and, therefore, NCUA believes
those areas should continue to be
considered WDLCs as part of the final
rule.
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4. Rural District
In the 2009 proposal, the Board
proposed to define the term ‘‘rural
district’’ to help extend credit union
services to individuals living in rural
America without adequate access to
reasonably priced financial services.
Specifically, the NCUA Board defined a
rural district as a contiguous area that
has more than 50% of its population in
census blocks that are designated as
rural and the total population of the area
does not exceed 100,000 persons, stating
that these requirements will ensure that
a rural district has both a small total
population and a majority of its
population in areas classified as rural by
the United States Census Bureau.
In the 2007 proposal, the Board
proposed a different definition of rural
district. Specifically, the Board defined
rural district as an area that is not in an
MSA or MicroSA, has a population
density that does not exceed 100 people
per square mile, and where the total
population does not exceed 100,000.
That definition would have excluded
the majority of the United States
population that lives in and around
large urban areas yet, based on census
data, still include the vast majority of
counties in the United States having
fewer than 100,000 persons. Population
density varies widely but many counties
also have a density of less than 100
persons per square mile. Those
requirements would have assured that
an area under consideration as a rural
district would have a small total
population and a relatively light
population density.
Over half of the commenters opposed
the 2009 proposed definition of rural
district primarily because they believe
the 100,000 person population cap is
too small. Some commenters stated the
100,000 person limit is too small to
sustain a viable FCU considering the
lack of economies of scale and the fact
that community chartered credit unions
generally have a lower penetration rate
than other kinds of credit union
charters. A few commenters noted that
many truly rural areas contain a small
hub city which when included in the
area would exceed the 100,000 person
population limit. Some commenters
stated that if NCUA chooses to impose
a population limit, then it should be
higher.
NCUA has also received comment
that it is more difficult for an FCU to
reach and attract members from
individuals living in large rural areas
with widely disbursed populations.
Those members are often more
expensive to serve than members in a
smaller geographic area with a higher
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population concentration. In addition,
the penetration rate of community
charters is significantly less than single
or multiple common bond charters and,
therefore, a higher population limit is
necessary to ensure economic viability.
Accordingly, NCUA believes it is
warranted to increase the population
limit to 200,000 people. This will help
ensure the rural district criteria are
realistic and that an FCU can be viable
in serving a rural district given the
economic realities of an FCU’s cost to
serve rural members. Also, NCUA
wishes to clarify that in defining a rural
district, NCUA recognizes four types of
affinity on which a rural district can be
based—persons who live in, worship in,
attend school in, or work in the rural
district. Businesses and other legal
entities within the rural district may
also qualify for membership.
NCUA believes the creation of rural
districts will play a significant role in
allowing FCUs to provide affordable
financial services to individuals in rural
communities that otherwise would not
have such services. To that end and to
provide as much flexibility as
reasonably possible, NCUA is
expanding the definition of rural district
so that an FCU can establish a rural
district by satisfying either the
definition of rural district proposed in
the 2009 proposal, with the modified
population limit, or a definition similar
to that proposed in the 2007 proposal,
also with the modified population limit.
Specifically, NCUA defines rural district
in the final rule as:
• A district that has well-defined,
contiguous geographic boundaries;
• More than 50% of the district’s
population resides in census blocks or
other geographic areas that are
designated as rural by the United States
Census Bureau; and
• The total population of the district
does not exceed 200,000 people; or
• A district that has well-defined,
contiguous geographic boundaries;
• The district does not have a
population density in excess of 100
people per square mile; and
• The total population of the district
does not exceed 200,000 people.
5. Underserved Communities
In December 2008, NCUA adopted a
final rule modifying its Chartering
Manual to update and clarify four
aspects of the process and criteria for
approving credit union service to
underserved areas. 73 FR 73392 (Dec. 2,
2008). First, the rule clarified that an
underserved area must independently
qualify as a WDLC. Second, it made
explicit that the Community
Development Financial Institution
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Fund’s ‘‘geographic units’’ of measure
and 85 percent population threshold,
when applicable, must be used to
determine whether a proposed area
meets the ‘‘criteria of economic distress’’
incorporated by reference in the FCU
Act. Third, it updated the
documentation requirements for
demonstrating that a proposed area has
‘‘significant unmet needs’’ among a
range of specified financial products
and services. Finally, the rule adopted
a ‘‘concentration of facilities’’
methodology to implement the statutory
requirement that a proposed area must
be ‘‘underserved by other depository
institutions.’’ 73 FR 73392, 73396 (Dec.
2, 2008).
Using data supplied by NCUA, the
‘‘concentration of facilities’’
methodology compares the ratio of
depository institution facilities to the
population within a proposed area’s
‘‘non-distressed’’ portions against the
same facilities-to-population ratio in the
proposed area as a whole. When that
ratio in the area as a whole shows more
persons per facility than does the same
ratio in the ‘‘non-distressed’’ portions,
the rule deems the area to be
‘‘underserved by other depository
institutions.’’ There is a perception that
this methodology measures only the
presence of financial institutions not the
variety of services and, therefore, it may
be an obstacle to establishing that an
area which clearly meets the ‘‘economic
distress criteria’’ also is ‘‘underserved by
other depository institutions’’ as
required for the area to qualify as
underserved. For example, there could
be a distressed area that contains more
financial institutions than a nondistressed area, but the products and
services offered by the financial
institutions in the distressed area might
focus on businesses and high-income
individuals. In this instance, the
distressed area would not qualify as
underserved despite truly lacking
affordable financial services for low to
moderate income individuals.
In the 2009 proposal, the NCUA
Board solicited public comment on
alternative methodologies, based on
publicly accessible data about both
credit unions and other depository
institutions, for implementing the Act’s
‘‘underserved by other depository
institutions’’ criterion.
A quarter of the commenters opposed
NCUA’s current methodology for
determining if an area is underserved.
About the same number of commenters
stated that an underserved area should
not have to satisfy the same criteria as
a WDLC. Unfortunately, commenters
did not articulate with any semblance of
consensus a realistic alternate
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36261
methodology. Accordingly, NCUA will
continue with the current methodology
until a better option is devised.
6. Ability To Serve and Marketing Plans
Establishing that an area is a WDLC is
only the first of two criteria an FCU
must satisfy to obtain a community
charter or community charter
expansion. The second criterion, after
establishing the existence of a WDLC, is
for an FCU to demonstrate it is able to
serve the WDLC. This applies to all
WDLCs including SPJs, statistical areas,
and grandfathered communities.
Typically, an FCU can demonstrate its
ability to serve an established WDLC in
its marketing plan.
Under the current Chartering Manual,
a credit union converting to or
expanding its community charter must
provide, ‘‘a marketing plan that
addresses how the community will be
served.’’ In the 2009 proposal, the Board
clarified NCUA’s marketing plan
requirement to provide credit unions
with additional guidance on NCUA’s
expectations. NCUA proposed that a
meaningful marketing plan must
demonstrate, in detail:
• How the credit union will
implement its business plan to serve the
entire community;
• The unique needs of the various
demographic groups in the proposed
community;
• How the credit union will market to
each group, particularly underserved
groups;
• Which community-based
organizations the credit union will
target in its outreach efforts;
• The credit union’s marketing
budget projections dedicating greater
resources to reaching new members; and
• The credit union’s timetable for
implementation, not just a calendar of
events.
Additionally, the Board proposed that
the appropriate regional office will
follow-up with an FCU every year for
three years after the FCU has been
granted a new or expanded community
charter, and at any other intervals
NCUA believes appropriate, to
determine if the FCU is satisfying the
terms of its marketing and business
plans. An FCU failing to satisfy those
terms would be subject to supervisory
action.
Almost two thirds of the commenters
objected to NCUA reviewing an FCU’s
compliance with the terms of its
marketing plan after the FCU has been
granted a new or expanded community
charter. Most of those commenters
stated that as economic and other
conditions change over time an FCU
must make adjustments to its plan. They
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indicated a plan must be fluid and not
rigid and that FCUs should be afforded
this flexibility. Over a quarter of
commenters indicated that NCUA
should provide more information as to
how NCUA will determine if an FCU is
satisfying the terms of its marketing
plan and what supervisory action could
be taken if NCUA determines an FCU is
not doing so. NCUA fully recognizes the
need for flexibility in this context. An
FCU must adapt to changing economic
circumstances and it is reasonable for its
marketing plan to evolve accordingly. It
was not NCUA’s intent in the 2009
proposal to suggest otherwise.
Accordingly, this aspect of the 2009
proposal remains unchanged in the final
rule, but NCUA’s stresses plan rigidity
is not its goal. NCUA simply wants to
make certain an FCU that is granted a
community charter makes a continuing
good faith effort to serve that
community as it indicated it would in
its marketing plan. NCUA did not
specify exactly what kinds of
supervisory action might be taken for
failure of an FCU to comply with its
marketing plan because those decisions
are best left to a case-by-case
determination depending on the nature
of the circumstances. In any event,
NCUA intends to provide an FCU with
flexibility to comply with or reasonably
alter its marketing plan as dictated by
circumstances.
7. Emergency Mergers
Under the emergency merger
provision of section 205(h) of the Act,
the NCUA Board may allow a credit
union that is either insolvent or in
danger of insolvency to merge with
another credit union if the NCUA Board
finds that an emergency requiring
expeditious action exists, no other
reasonable alternatives are available,
and the action is in the public interest.
12 U.S.C. 1785(h). The Board may
approve an emergency merger without
regard to common bond or other legal
constraints, such as obtaining the
approval of the members of the merging
credit union to the merger.
NCUA must first determine that a
credit union is either insolvent or in
danger of insolvency before it makes the
additional findings that an emergency
exists, other alternatives are not
reasonably available, and that the public
interest would be served by the merger.
The statute, however, does not define
when a credit union is ‘‘in danger of
insolvency.’’ In the 2009 proposal,
NCUA adopted an objective standard to
aid it in making the ‘‘in danger of
insolvency’’ determination and provide
certainty and consistency in how NCUA
interprets the standard. Specifically,
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NCUA proposed that a credit union is
in danger of insolvency if it falls into
one or more of the following three
categories:
1. The credit union’s net worth is
declining at a rate that will render it
insolvent within 24 months. In NCUA’s
experience with troubled credit unions,
the trend line to zero net worth often
worsens once a credit union actually
approaches zero net worth. It is more
difficult for NCUA to keep the costs to
the National Credit Union Share
Insurance Fund (NCUSIF) low when a
credit union is near, or below, zero net
worth.1
2. The credit union’s net worth is
declining at a rate that will take it under
two percent (2%) net worth within 12
months. A credit union with a net worth
ratio of less than two percent (2%) falls
into the PCA category of ‘‘critically
undercapitalized.’’ 12 U.S.C.
1790d(c)(1)(E); 12 CFR 702.102(a)(5).
Congress, in adding the PCA mandates
to the Act, created a presumption that
a critically undercapitalized credit
union should be liquidated or conserved
if its financial condition does not
improve within a short period. 12 U.S.C.
1790d(i); 12 CFR 702.204(c).
3. The credit union’s net worth, as
self-reported on its Call Report, is
significantly undercapitalized, and
NCUA determines that there is no
reasonable prospect of the credit union
becoming adequately capitalized in the
succeeding 36 months. A credit union
with a net worth ratio between two
percent (2%) or more but less than four
percent (4%) falls into the PCA category
of ‘‘significantly undercapitalized.’’ 12
U.S.C. 1790d(c)(1)(D); 12 CFR
702.102(a)(4). A credit union with a net
worth ratio of six percent (6%) falls into
the PCA category of ‘‘adequately
capitalized.’’ 12 U.S.C. 1709d(c)(1)(B);
12 CFR 702.102(a)(2).
Section 702.203(c) of NCUA’s PCA
regulation states:
Discretionary conservatorship or
liquidation if no prospect of becoming
‘‘adequately capitalized.’’ Notwithstanding
any other actions required or permitted to be
taken under this section, when a credit union
becomes ‘‘significantly undercapitalized’’
* * *, the NCUA Board may place the credit
union into conservatorship pursuant to 12
1 Under NCUA’s system of prompt corrective
action (PCA), as a credit union’s net worth declines
below minimum requirements, the credit union
faces progressively more stringent safeguards. The
goal is to resolve net worth deficiencies promptly,
before they become more serious, and in any event
before they cause losses to the NCUSIF. The PCA
statute sets forth NCUA’s duty to take prompt
corrective action to resolve the problems of troubled
credit unions to avoid or minimize loss to the
NCUSIF. S. Rpt. No. 193, 105th Cong., 2d Sess. 12
(1998); 12 U.S.C. 1790d; 12 CFR part 702.
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U.S.C. 1786(h)(1)(F), or into liquidation
pursuant to 12 U.S.C. 1787(a)(3)(A)(i),
provided that the credit union has no
reasonable prospect of becoming ‘‘adequately
capitalized.’’
12 CFR 702.203(c). An example of no
reasonable prospect of becoming
adequately capitalized would be a credit
union’s inability, after working with
NCUA, to demonstrate how it would
restore net worth to this level. This
could include the credit union’s failure,
after working with NCUA, and
considering both possible increases in
retained earnings and decreases in
assets, to develop an acceptable Net
Worth Restoration Plan (NWRP). It
could also include the credit union’s
failure, after working with NCUA, to
materially comply with an approved
NWRP. In either case, NCUA must
document that the credit union is
unable to become adequately capitalized
within a 36-month timeframe.
A major credit union trade association
and the banking trade association
supported NCUA’s definition of ‘‘in
danger of insolvency’’ as proposed.
Another major credit union trade
association opposed it stating that it
gave NCUA latitude to conduct an
emergency merger if an FCU is
significantly undercapitalized regardless
of other supervisory issues that might
suggest a merger is not necessary. NCUA
continues to believe the proposed
definition is reasonable and balanced
and serves the public interest. The
definition lends certainty to how NCUA
will determine that an FCU is in danger
of insolvency. Some commenters want
NCUA to make the determination earlier
in the process when the distressed FCU
is still an attractive merger partner and
others want NCUA to wait longer. All
commenters are reminded that, in either
event, NCUA is bound by statutory
limits on non-emergency mergers of
credit unions with dissimilar charters.
The proposed definition is finalized
without change.
8. Delegations of Processing Authority
Although NCUA did not ask for
comments in this regard, a few
commenters suggested NCUA’s regional
offices should be delegated authority to
process to completion any community
related FOM application without input
from the Board or concurrence of other
NCUA offices. NCUA agrees this would
expedite processing community charter
applications and will review its
procedures.
C. Regulatory Procedures
Regulatory Flexibility Act
The Regulatory Flexibility Act
requires NCUA to prepare an analysis to
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describe any significant economic
impact a rule may have on a substantial
number of small entities (primarily
those under ten million dollars in
assets). This rule will not have a
significant economic impact on a
substantial number of small credit
unions, and therefore, no regulatory
flexibility analysis is required.
Small Business Regulatory Enforcement
Fairness Act
The Small Business Regulatory
Enforcement Fairness Act (SBREFA) of
1996, Public Law 104–121, provides
generally for congressional review of
agency rules. A reporting requirement is
triggered in instances where NCUA
issues a final rule as defined by Section
551 of the Administrative Procedures
Act. 5 U.S.C. 551. The Office of
Information and Regulatory Affairs, an
office within OMB, is currently
reviewing this rule, and NCUA
anticipates it will determine that, for
purposes of SBREFA, this is not a major
rule.
Paperwork Reduction Act
In accordance with the requirements
of the Paperwork Reduction Act of 1995
(PRA), NCUA may not conduct or
sponsor, and the respondent is not
required to respond to, an information
collection unless it displays a currently
valid OMB control number. The OMB
control number assigned to § 701.1 is
3133–0015, and to the forms included in
Appendix D is 3133–0116. NCUA has
determined that the amendments will
not increase paperwork requirements
and a paperwork reduction analysis is
not required.
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Executive Order 13132
Executive Order 13132 encourages
independent regulatory agencies to
consider the impact of their actions on
state and local interests. In adherence to
fundamental federalism principles,
NCUA, an independent regulatory
agency as defined in 44 U.S.C. 3502(5),
voluntarily complies with the executive
order. This final rule will not have a
substantial direct effect on the states, on
the relationship between the national
government and the states, or on the
distribution of power and
responsibilities among the various
levels of government. NCUA has
determined that this final rule does not
constitute a policy that has federalism
implications for purposes of the
executive order because it only applies
to FCUs.
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The Treasury and General Government
Appropriations Act, 1999—Assessment
of Federal Regulations and Policies on
Families
NCUA has determined that this final
rule will not affect family well-being
within the meaning of section 654 of the
Treasury and General Government
Appropriations Act, 1999, Public Law
105–277, 112 Stat. 2681 (1998).
• Other alternatives are not reasonably
available; and
• The public interest would best be served
by approving the merger.
List of Subjects in 12 CFR Part 701
Credit, Credit unions, Reporting and
recordkeeping requirements.
An emergency merger may be approved by
NCUA without regard to common bond or
other legal constraints. An emergency merger
involves NCUA’s direct intervention and
approval. The credit union to be merged
must either be insolvent or in danger of
insolvency, as defined in the Glossary, and
NCUA must determine that:
• An emergency requiring expeditious
action exists;
• Other alternatives are not reasonably
available; and
• The public interest would best be served
by approving the merger.
By the National Credit Union
Administration Board on June 17, 2010
Mary Rupp,
Secretary of the Board.
For the reasons discussed above,
NCUA amends 12 CFR part 701 as
follows:
■
PART 701—ORGANIZATION AND
OPERATIONS OF FEDERAL CREDIT
UNIONS
1. The authority citation for part 701
continues to read as follows:
■
Authority: 12 U.S.C. 1752(5), 1755, 1756,
1757, 1759, 1761a, 1761b, 1766, 1767, 1782,
1784, 1787, 1789. Section 701.6 is also
authorized by 15 U.S.C. 3717. Section 701.31
is also authorized by 15 U.S.C. 1601, et seq.,
42 U.S.C. 1981 and 3601–3610. Section
701.35 is also authorized by 12 U.S.C. 4311–
4312.
2. Section 701.1 is revised to read as
follows:
■
§ 701.1 Federal credit union chartering,
field of membership modifications, and
conversions.
National Credit Union Administration
policies concerning chartering, field of
membership modifications, and
conversions, also known as the
Chartering and Field of Membership
Manual, are set forth in appendix B to
this part and are available on-line at
https://www.ncua.gov.
3. The first paragraph of Section
II.D.2. of Chapter 2 of appendix B to part
701 is revised to read as follows:
■
Appendix B to Part 701—Chartering
and Field of Membership Manual
*
*
*
*
*
II.D.2—Emergency Mergers
An emergency merger may be approved by
NCUA without regard to common bond or
other legal constraints. An emergency merger
involves NCUA’s direct intervention and
approval. The credit union to be merged
must either be insolvent or in danger of
insolvency, as defined in the Glossary, and
NCUA must determine that:
• An emergency requiring expeditious
action exists;
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*
*
*
*
*
4. The first paragraph of Section
III.D.2. of Chapter 2 of appendix B to
part 701 is revised to read as follows:
■
III.D.2—Emergency Mergers
*
*
*
*
*
5. The first paragraph of Section
IV.D.3. of Chapter 2 of appendix B to
part 701 is revised to read as follows:
■
IV.D.3—Emergency Mergers
An emergency merger may be approved by
NCUA without regard to common bond or
other legal constraints. An emergency merger
involves NCUA’s direct intervention and
approval. The credit union to be merged
must either be insolvent or in danger of
insolvency, as defined in the Glossary, and
NCUA must determine that:
• An emergency requiring expeditious
action exists;
• Other alternatives are not reasonably
available; and
• The public interest would best be served
by approving the merger.
*
*
*
*
*
6. Section V.A. of Chapter 2 of
appendix B to part 701 is revised to read
as follows:
■
Chapter 2
V.A.1—General
There are two types of community charters.
One is based on a single, geographically welldefined local community or neighborhood;
the other is a rural district. More than one
credit union may serve the same community.
NCUA recognizes four types of affinity on
which both a community charter and a rural
district can be based—persons who live in,
worship in, attend school in, or work in the
community or rural district. Businesses and
other legal entities within the community
boundaries or rural district may also qualify
for membership.
NCUA has established the following
requirements for community charters:
• The geographic area’s boundaries must
be clearly defined; and
• The area is a well-defined local
community or a rural district.
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V.A.2—Definition of Well-Defined Local
Community and Rural District
In addition to the documentation
requirements in Chapter 1 to charter a credit
union, a community credit union applicant
must provide additional documentation
addressing the proposed area to be served
and community service policies.
An applicant has the burden of
demonstrating to NCUA that the proposed
community area meets the statutory
requirements of being: (1) well-defined, and
(2) a local community or rural district.
‘‘Well-defined’’ means the proposed area
has specific geographic boundaries.
Geographic boundaries may include a city,
township, county (single, multiple, or
portions of a county) or their political
equivalent, school districts, or a clearly
identifiable neighborhood. Although
congressional districts and state boundaries
are well-defined areas, they do not meet the
requirement that the proposed area be a local
community or rural district.
The well-defined local community
requirement is met if:
• Single Political Jurisdiction—The area to
be served is in a recognized single political
jurisdiction, i.e., a city, county, or their
political equivalent, or any contiguous
portion thereof.
• Statistical Area—
• The area is a designated Core Based
Statistical Area (CBSA) or allowing part
thereof, or in the case of a CBSA with
Metropolitan Divisions, the area is a
Metropolitan Division or part thereof; and
• The CBSA or Metropolitan Division must
have a population of 2.5 million or less
people.
The rural district requirement is met if:
• Rural District—
• The district has well-defined, contiguous
geographic boundaries;
• More than 50% of the district’s
population resides in census blocks or other
geographic areas that are designated as rural
by the United States Census Bureau; and
• The total population of the district does
not exceed 200,000 people; or
• The district has well-defined, contiguous
geographic boundaries;
• The district does not have a population
density in excess of 100 people per square
mile; and
• The total population of the district does
not exceed 200,000 people.
The affinities that apply to rural districts
are the same as those that apply to well
defined local communities. The OMB
definitions of CBSA and Metropolitan
Division may be found at 65 FR82238 (Dec.
27, 2000). They are incorporated herein by
reference. Access to these definitions is
available through the main page of the
Federal Register Web site at https://
www.gpoaccess.gov/fr/ and on
NCUA’s Web site at https://www.ncua.gov.
The requirements in Chapter 2, Sections
V.A.4 through V.G. also apply to a credit
union that serves a rural district.
V.A.3—Previously Approved Communities
If prior to July 26, 2010 NCUA has
determined that a specific geographic area is
a well defined local community, then a new
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applicant need not reestablish that fact as
part of its application to serve the exact area.
The new applicant must, however, note
NCUA’s previous determination as part of its
overall application. An applicant applying
for an area after that date that is not exactly
the same as the previously approved well
defined local community must comply with
the current criteria in place for determining
a well defined local community.
V.A.4—Business Plan Requirements for a
Community Credit Union
A community credit union is frequently
more susceptible to competition from other
local financial institutions and generally does
not have substantial support from any single
sponsoring company or association. As a
result, a community credit union will often
encounter financial and operational factors
that differ from an occupational or
associational charter. Its diverse membership
may require special marketing programs
targeted to different segments of the
community. For example, the lack of payroll
deduction creates special challenges in the
development and promotion of savings
programs and in the collection of loans.
Accordingly, to support an application for a
community charter, an applicant Federal
credit union must develop a business plan
incorporating the following data:
• Pro forma financial statements for a
minimum of 24 months after the proposed
conversion, including the underlying
assumptions and rationale for projected
member, share, loan, and asset growth;
• Anticipated financial impact on the
credit union, including the need for
additional employees and fixed assets, and
the associated costs;
• A description of the current and
proposed office/branch structure, including a
general description of the location(s); parking
availability, public transportation
availability, drive-through service, lobby
capacity, or any other service feature
illustrating community access;
• A marketing plan addressing how the
community will be served for the 24-month
period after the proposed conversion to a
community charter, including detailing: how
the credit union will implement its business
plan; the unique needs of the various
demographic groups in the proposed
community; how the credit union will
market to each group, particularly
underserved groups; which communitybased organizations the credit union will
target in its outreach efforts; the credit
union’s marketing budget projections
dedicating greater resources to reaching new
members; and the credit union’s timetable for
implementation, not just a calendar of events;
• Details, terms and conditions of the
credit union’s financial products, programs,
and services to be provided to the entire
community; and
• Maps showing the current and proposed
service facilities, ATMs, political boundaries,
major roads, and other pertinent information.
An existing Federal credit union may
apply to convert to a community charter.
Groups currently in the credit union’s field
of membership, but outside the new
community credit union’s boundaries, may
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not be included in the new community
charter. Therefore, the credit union must
notify groups that will be removed from the
field of membership as a result of the
conversion. Members of record can continue
to be served.
Before approval of an application to
convert to a community credit union, NCUA
must be satisfied that the credit union will
be viable and capable of providing services
to its members.
Community credit unions will be expected
to regularly review and to follow, to the
fullest extent economically possible, the
marketing and business plans submitted with
their applications. Additionally, NCUA will
follow-up with an FCU every year for three
years after the FCU has been granted a new
or expanded community charter, and at any
other intervals NCUA believes appropriate, to
determine if the FCU is satisfying the terms
of its marketing and business plans. An FCU
failing to satisfy those terms will be subject
to supervisory action. As part of this review
process, the regional office will report to the
NCUA Board instances where an FCU is
failing to satisfy the terms of its marketing
and business plan and indicate what
supervisory actions the region intends to
take.
V.A.5—Community Boundaries
The geographic boundaries of a community
Federal credit union are the areas defined in
its charter. The boundaries can usually be
defined using political borders, streets,
rivers, railroad tracks, or other static
geographical feature.
A community that is a recognized legal
entity may be stated in the field of
membership—for example, ‘‘Gus Township,
Texas,’’ ‘‘Isabella City, Georgia,’’ or ‘‘Fairfax
County, Virginia.’’
A community that is a recognized CBSA
must state in the field of membership the
political jurisdiction(s) that comprise the
CBSA.
V.A.6—Special Community Charters
A community field of membership may
include persons who work or attend school
in a particular industrial park, shopping
mall, office complex, or similar development.
The proposed field of membership must have
clearly defined geographic boundaries.
V.A.7—Sample Community Fields of
Membership
A community charter does not have to
include all four affinities (i.e., live, work,
worship, or attend school in a community).
Some examples of community fields of
membership are:
• Persons who live, work, worship, or
attend school in, and businesses located in
the area of Johnson City, Tennessee, bounded
by Fern Street on the north, Long Street on
the east, Fourth Street on the south, and Elm
Avenue on the west;
• Persons who live or work in Green
County, Maine;
• Persons who live, worship, work (or
regularly conduct business in), or attend
school on the University of Dayton campus,
in Dayton, Ohio;
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• Persons who work for businesses located
in Clifton Country Mall, in Clifton Park, New
York;
• Persons who live, work, or worship in
the Binghamton, New York, CBSA, consisting
of Broome and Tioga Counties, New York (a
qualifying CBSA in its entirety);
• Persons who live, work, worship, or
attend school in the portion of the Oklahoma
City, OK MSA that includes Canadian and
Oklahoma counties, Oklahoma (two
contiguous counties in a portion of a
qualifying CBSA that has seven counties in
total); or
• Persons who live, work, worship, or
attend school in Uinta County or Lincoln
County, Wyoming, a rural district.
Some examples of insufficiently defined
local communities, neighborhoods, or rural
districts are:
• Persons who live or work within and
businesses located within a ten-mile radius
of Washington, DC (using a radius does not
establish a well-defined area);
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• Persons who live or work in the
industrial section of New York, New York.
(not a well-defined neighborhood,
community, or rural district); or
• Persons who live or work in the greater
Boston area. (not a well-defined
neighborhood, community, or rural district).
Some examples of unacceptable local
communities, neighborhoods, or rural
districts are:
• Persons who live or work in the State of
California. (does not meet the definition of
local community, neighborhood, or rural
district).
• Persons who live in the first
congressional district of Florida. (does not
meet the definition of local community,
neighborhood, or rural district).
7. The first paragraph of Section
V.D.2. of Chapter 2 of appendix B to
part 701 is revised to read as follows:
■
V.D.2—Emergency Mergers
An emergency merger may be approved by
NCUA without regard to common bond or
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other legal constraints. An emergency merger
involves NCUA’s direct intervention and
approval. The credit union to be merged
must either be insolvent or in danger of
insolvency, as defined in the Glossary, and
NCUA must determine that:
• An emergency requiring expeditious
action exists;
• Other alternatives are not reasonably
available; and
• The public interest would best be served
by approving the merger.
*
*
*
*
*
8. Section III.B.1 of Chapter 3 of
appendix B to part 701 is amended by
removing the last sentence of that
section.
■
9. In Appendix B to part 701, revise
Appendix 1 to read as follows:
■
BILLING CODE 7535–01–P
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Federal Register / Vol. 75, No. 122 / Friday, June 25, 2010 / Rules and Regulations
[FR Doc. 2010–15130 Filed 6–24–10; 8:45 am]
BILLING CODE 7535–01–C
FEDERAL FINANCIAL INSTITUTIONS
EXAMINATION COUNCIL
12 CFR Part 1102
[Docket No. AS10–2]
Appraisal Subcommittee; Appraiser
Regulation; Privacy Act
Implementation
Appraisal Subcommittee of the
Federal Financial Institutions
Examination Council (Subcommittee).
ACTION: Final rule amendments.
AGENCY:
SUMMARY: The Subcommittee is
adopting nonsubstantive amendments to
its regulations relating to the Privacy
Act of 1974. The amendments correct
the street address and zip code for the
Subcomittee’s office, which was moved
in October 2008, from 2000 K Street,
NW., Suite 310, Washington, DC 20006,
to 1401 H Street, NW., Suite
760,Washington, DC 20005.
DATES: Effective Date: June 25, 2010.
FOR FURTHER INFORMATION CONTACT:
Alice M. Ritter, General Counsel, at
(202) 595–7577 or alice@asc.gov;
Appraisal Subcommittee; 1401 H Street,
NW., Suite 760, Washington, DC 20005.
SUPPLEMENTARY INFORMATION:
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I. Authority and Section-by-Section
Analysis
The Privacy Act of 1974 is based, in
part, on the finding by Congress that ‘‘in
order to protect the privacy of
individuals identified in information
systems maintained by Federal agencies,
it is necessary and proper for the
Congress to regulate the collection,
maintenance, use, and dissemination of
information by such agencies.’’ To
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essentially are nomenclature changes, as
that term is defined in the Federal
Register Document Drafting Handbook,
page 2–31 (October 1998).
achieve this objective, the Act generally
provides that Federal agencies must
advise an individual upon request
whether records maintained by the
agency in a system of records pertain to
the individual and must grant the
individual access to such records. The
Act further provides that individuals
may request amendments to records
pertaining to them that are maintained
by the agency, and that the agency shall
either grant the requested amendments
or set forth fully its reasons for refusing
to do so.
In 1992, the Subcommittee, pursuant
to subsection (f) of the Privacy Act,
adopted 12 CFR subpart C containing
rules and procedures to implement the
Privacy Act. In October 2008, the
Subcommittee moved its offices from
2000 K Street, NW., to its current
location at 1401 H Street, NW. Subpart
C, as adopted, contains numerous
references to the Subcommittee’s K
Street address. The Subcommittee is
amending subpart C by removing all
references to the former K Street
location and replacing them with the
Subcommittee’s current H Street
address.
■
II. Administrative Requirements
Authority: Privacy Act of 1974, Pub. L. 93–
579, 88 Stat. 1896; 12 U.S.C. 552a, as
amended.
A. Notice and Comment Requirements
Under 5 U.S.C. 553
The Subcommittee, under 12 U.S.C.
553, is required, among other things, to
publish in the Federal Register for
public notice and comment a general
notice of proposed rule making, unless,
in accordance with paragraph (b)(3)(B),
the agency finds ‘‘for good cause * * *
that notice and public procedure
thereon are impracticable, unnecessary,
or contrary to the public interest.’’ The
Subcommittee finds that notice and
procedure are unnecessary in
connection with these rule amendments
because they are nonsubstantive and
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List of Subjects in 12 CFR Part 1102
Administrative practice and
procedure, Banks, banking, Freedom of
information, Mortgages, Organization
and functions (Government agencies),
Reporting and recordkeeping
requirements.
Text of the Rule
For the reasons set forth in the
preamble, title 12, chapter XI of the
Code of Federal Regulations is amended
as follows:
PART 1102—APPRAISER
REGULATION
Subpart C—Rules Pertaining to the
Privacy of Individuals and Systems of
Records Maintained by the Appraisal
Subcommittee
1. The authority citation for part 1102,
subpart C is revised to read as follows:
■
§§ 1102.102, 1102.105, and 1102.107
[Amended]
2. In 12 CFR part 1102, remove the
words ‘‘2000 K Street, NW., Suite 310,
Washington, DC 20006’’ and add, in
their place, the words, ‘‘1401 H Street,
NW., Suite 760,Washington, DC 20005’’
in the following places:
■ a. Section 1102.102(a) introductory
text, and (a)(2);
■ b. Section 1102.105(a); and
■ c. Section 1102.107(a)(2), and (b)(1).
■
By the Appraisal Subcommittee.
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Agencies
[Federal Register Volume 75, Number 122 (Friday, June 25, 2010)]
[Rules and Regulations]
[Pages 36257-36270]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-15130]
========================================================================
Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
Prices of new books are listed in the first FEDERAL REGISTER issue of each
week.
========================================================================
Federal Register / Vol. 75, No. 122 / Friday, June 25, 2010 / Rules
and Regulations
[[Page 36257]]
NATIONAL CREDIT UNION ADMINISTRATION
12 CFR Part 701
RIN 3133-AD65
Chartering and Field of Membership for Federal Credit Unions
AGENCY: National Credit Union Administration (NCUA).
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: NCUA is amending its chartering and field of membership manual
to update its community chartering policies. These amendments include
using objective and quantifiable criteria to determine the existence of
a local community and defining the term ``rural district.'' The
amendments clarify NCUA's marketing plan requirements for credit unions
converting to or expanding their community charters and define the term
``in danger of insolvency'' for emergency merger purposes.
DATES: The rule is effective July 26, 2010.
FOR FURTHER INFORMATION CONTACT: Michael J. McKenna, Deputy General
Counsel; John K. Ianno, Associate General Counsel; Frank Kressman,
Staff Attorney, Office of General Counsel, or Robert Leonard, Program
Officer, Office of Examination and Insurance, 1775 Duke Street,
Alexandria, Virginia 22314 or telephone (703) 518-6540 or (703) 518-
6396.
SUPPLEMENTARY INFORMATION:
A. Background and Summary of Final Action
In 1998, Congress passed the Credit Union Membership Access Act
(``CUMAA'') and reiterated its longstanding support for credit unions,
noting that they ``have the specif[ic] mission of meeting the credit
and savings needs of consumers, especially persons of modest means.''
Public Law 105-219, Sec. 2, 112 Stat. 913 (August 7, 1998). The
Federal Credit Union Act (``FCU Act'') grants the NCUA Board broad
general rulemaking authority over Federal credit unions. 12 U.S.C.
1766(a). In passing CUMAA, Congress amended the FCU Act and
specifically delegated to the Board the authority to define by
regulation the meaning of a ``well-defined local community'' (WDLC) and
rural district for Federal credit union charters. 12 U.S.C. 1759(g).
The Board continues to recognize two important characteristics of a
WDLC. First, there is geographic certainty to the community's
boundaries, which must be well-defined. Second, there is sufficient
social and economic activity among enough community members to assure
that a viable community exists. Since CUMAA, NCUA has expressed this
latter requirement as ``interaction and/or shared common interests.''
NCUA Chartering and Field of Membership Manual (Chartering Manual),
Interpretive Ruling and Policy Statement (IRPS) 08-2, Chapter 2, V.A.1.
The Board has gained broad experience in determining what
constitutes a WDLC by analyzing numerous applications for community
charter conversions and expansions. In this process, the Board has
exercised its regulatory judgment in determining whether, in a
particular case, a WDLC exists. This involves applying its expertise to
the question of whether a proposed area has a sufficient level of
interaction and/or shared common interests to be considered a WDLC.
With the benefit of having received public comments to a proposal
to amend NCUA's community chartering rules issued in May 2007, NCUA
issued a substitute proposal in December 2009. 72 FR 30988 (June 5,
2007), 74 FR 68722 (December 29, 2009). Some provisions of the May 2007
proposal were incorporated into the 2009 proposal without change, while
others were modified or eliminated.
NCUA received comments on the 2009 proposal from 44 commenters
including 23 credit unions, 20 credit union trade associations, and 1
bank trade association. The commenters generally commended NCUA for
addressing the difficult issues that are the subject of the proposal.
The banking trade association opposed the proposal in general. All
commenters offered some suggested revisions to the proposal.
As discussed more fully below, the following aspects of the 2009
proposal will be finalized without change: (1) The treatment of single
political jurisdictions (SPJs); (2) the elimination of the narrative
approach; (3) the grandfathering of previously approved WDLCs; (4) the
treatment of underserved areas; (5) the ability to serve analysis and
marketing plan requirements; and (6) the definition of ``in danger of
insolvency.''
As a result of further deliberations and consideration of the
public comments, NCUA is making final amendments to: (1) the criteria
required for establishing a multiple political jurisdiction WDLC, and
(2) the definition of ``rural district.'' These adjustments fine tune
NCUA's chartering policies to balance enabling an FCU to fulfill its
mission to provide reasonably priced financial services to qualifying
members with NCUA's need to comply with the statutory provisions in the
FCU Act. Both adjustments will make the chartering policies more
practical.
B. Overview of December 2009 Proposal and Section-By-Section Analysis
1. Well Defined Local Communities
In the proposal, NCUA noted it believed it continues to be prudent
policy to consider SPJs and statistical areas, as those terms are
described more fully below, as WDLCs because they meet reasonable
objective and quantifiable standards. SPJs were treated the same in the
2009 proposal as in the 2007 proposal. Statistical areas, however, were
treated somewhat differently in the 2009 proposal from how they were
treated in the 2007 proposal. In the 2009 proposal, NCUA added an
additional criterion an applicant must meet to establish that a
statistical area with multiple jurisdictions is a WDLC. Specifically,
that additional criterion limits a multiple jurisdiction WDLC's
population to 2.5 million or less people, as discussed further below.
a. WDLCs
i. Single Political Jurisdictions
The FCU Act provides that a ``community credit union'' consists of
``persons or organizations within a well-defined local community,
[[Page 36258]]
neighborhood, or rural district.'' 12 U.S.C. 1759(b)(3). The FCU Act
expressly requires the Board to apply its regulatory expertise and
define what constitutes a WDLC. 12 U.S.C. 1759(g). It has done so in
the Chartering Manual, Chapter 2, Section V, Community Charter
Requirements. In 2003, the Board, after issuing notice and seeking
comments, issued IRPS 03-1 that stated any county, city, or smaller
political jurisdiction, regardless of population size, is by definition
a WDLC. 68 FR18334, 18337 (Apr. 15, 2003). An entire state is not
acceptable as a WDLC. Under this definition, no documentation
demonstrating that the political jurisdiction is a WDLC is required.
After many years of experience, the Board has reviewed this
definition of WDLC and still finds it compelling. The Board finds that
a single governmental unit below the State level is well-defined and
local, consistent with the governmental system in the United States
consisting of a local, State, and Federal government structure. An SPJ
also has strong indicia of a community, including common interests and
interaction among residents. Local governments by their nature
generally must provide residents with common services and facilities,
such as educational, police, fire, emergency, water, waste, and medical
services. Further, an SPJ frequently has other indicia of a WDLC such
as a major trade area, employment patterns, local organizations and/or
a local newspaper. Such examples of commonalities are indicia that SPJs
are WDLCs where residents have common interests and/or interact.
About a third of the commenters supported NCUA continuing to treat
an SPJ as a presumed WDLC. The bank trade association opposed that
treatment. NCUA agrees that an SPJ, less than an entire state, by its
very nature has sufficient indicia of interaction to continue to be
treated as a WDLC in the final rule.
ii. Statistical Areas
The Board proposed to establish a statistical definition of WDLC in
cases involving multiple political jurisdictions. In that context, a
geographically certain area would be considered a WDLC when the
following four requirements are met: (1) The area is a recognized core
based statistical area (CBSA), or in the case of a CBSA with
Metropolitan Divisions, the area is a single Metropolitan Division; (2)
the area contains a dominant city, county or equivalent with a majority
of all jobs in the CBSA or in the metropolitan division; (3) the
dominant city, county or equivalent contains at least \1/3\ of the
CBSA's or Metropolitan Division's total population; and (4) the area
has a population of 2.5 million or less people.
The Board's experience has been that WDLCs can come in various
population and geographic sizes. While the statutory language `local
community' does imply some limit, Congress has directed NCUA to
establish a regulatory definition consistent with the mission of credit
unions. While SPJs below the state level meet the definition of a WDLC,
nothing precludes a larger area comprised of multiple political
jurisdictions from also meeting the regulatory definition. There is no
statutory requirement or economic rationale that compels the Board to
charter only the smallest WDLC in a particular area.
The Board's experience has been that applicants have the most
difficulty in preparing applications involving larger areas with
multiple political jurisdictions. This is because, as the population
and the geographic area increase and multiple jurisdictions are
involved, it can be more difficult to demonstrate interaction and/or
shared common interests. This often causes some confusion to the
applicant about what evidence is required and what criteria are
considered to be most significant under such circumstances.
The current chartering manual provides examples of the types of
information an applicant can provide that would normally evidence
interaction and/or shared common interests. These include but are not
limited to: (1) Defined political jurisdictions; (2) major trade areas;
(3) shared common facilities; (4) organizations within the community
area; and (5) newspapers or other periodicals about the area.
These examples are helpful but the Board's experience is that very
often in situations involving multiple jurisdictions, where it has
determined that a WDLC exists, interaction or common interests are
evidenced by a major trade area that is an economic hub, usually a
dominant city, county or equivalent, containing a significant portion
of the area's employment and population. This central core often acts
as a nucleus drawing a sufficiently large critical mass of area
residents into the core area for employment and other social activities
such as entertainment, shopping, and educational pursuits. By providing
jobs to residents from outside the dominant core area, it also provides
income that then generates further interaction both in the hub and in
outlying areas as those individuals spend their earnings for a wide
variety of purposes in outlying counties where they live. This
commonality through interaction and/or shared common interests in
connection with an economic hub is conducive to a credit union's
success and supports a finding that such an area is a local community.
The Board views evidence that an area is anchored by a dominant
trade area or economic hub as a strong indication that there is
sufficient interaction and/or common interests to support a finding of
a WDLC capable of sustaining a credit union. This type of geographic
model greatly increases the likelihood that the residents of the
community manifest a ``commonality of routine interaction, shared and
related work experiences, interests, or activities * * *'' that are
essential to support a strong healthy credit union capable of providing
financial services to members throughout the area. Public Law 105-219,
Sec. 2(3), 112 Stat. 913 (August 7, 1998).
The Office of Management and Budget (OMB) publishes the geographic
areas its analysis indicates exhibit these important criteria. The
Board is familiar with and has utilized these statistics. In over six
years, the agency has approved in excess of 50 community charters
involving metropolitan statistical areas (MSAs), usually involving a
community based around a dominant core trade area.
The Board noted that when statistics can demonstrate the existence
of such relevant characteristics it is appropriate to presume that
sufficient interaction and/or common interests exist to support a
viable community based credit union. In such situations, the area will
meet the regulatory definition of a WDLC.
Certain areas, however, do not have one dominant economic hub, but
rather may contain two or more dominant hubs. These situations diminish
the persuasiveness of the evidence and make it inappropriate to
automatically conclude that they qualify as WDLCs.
On December 27, 2000, OMB published Standards for Defining MSAs and
micropolitan statistical areas (MicroSAs). 65 FR 82228 (December 27,
2000). The following definitions established by OMB are relevant here:
CBSA--``A statistical geographic entity consisting of the county or
counties associated with at least one core (urbanized area or urban
cluster) of at least 10,000 population, plus adjacent counties having a
high degree of social and economic integration with the core as
measured through commuting ties with the counties containing the core.
Metropolitan and Micropolitan Statistical Areas are the two categories
[[Page 36259]]
of Core Based Statistical Areas.'' 65 FR 82238 (Dec. 27, 2000).
Metropolitan Division--``A county or group of counties within a
Core Based Statistical Area that contains a core with a population of
at least 2.5 million.'' 65 FR 82238 (Dec. 27, 2000). OMB recognizes
that Metropolitan Divisions often function as distinct, social,
economic, and cultural areas within a larger MSA. See OMB Bulletin NO.
07-01, December 18, 2006.
Metropolitan Statistical Area--``A Core Based Statistical Area
associated with at least one urbanized area that has a population of at
least 50,000. The Metropolitan Statistical Area comprises the central
county or counties containing the core, plus adjacent outlying counties
having a high degree of social and economic integration with the
central county as measured through commuting.'' 65 FR 82238 (Dec. 27,
2000).
Micropolitan Statistical Area--``A Core Based Statistical Area
associated with at least one urban cluster that has a population of at
least 10,000, but less than 50,000. The Micropolitan Statistical Area
comprises the central county or counties containing the core, plus
adjacent outlying counties having a high degree of social and economic
integration with the central county as measured through commuting.'' 65
FR 82238 (Dec. 27, 2000).
Demonstrated commuting patterns supporting a high degree of social
and economic integration are a very significant factor in community
chartering, particularly in situations involving large areas with
multiple political jurisdictions. In a community based model,
significant interaction through commuting patterns into one central
area or urban core strengthens the membership of a credit union and
allows a community based credit union to efficiently serve the needs of
the membership throughout the area. Such data demonstrates a high
degree of interaction through the major life activity of working and
activities associated with employment. Large numbers of residents share
common interests in the various economic and social activities
contained within the core economic area.
Historically, commuting has been an uncomplicated method of
demonstrating functional integration. NCUA agrees with OMB's conclusion
that ``Commuting to work is an easily understood measure that reflects
the social and economic integration of geographic areas.'' 65 FR 82233
(Dec. 27, 2000). The Board also finds compelling OMB's conclusion that
commuting patterns within statistical areas demonstrate a high degree
of social and economic integration with the central county. OMB's
threshold for qualifying a county as an outlying county eligible for
inclusion in either a MSA or MicroSA is a threshold of 25% inter-county
commuting. OMB also considers a multiplier effect (a standard method
used in economic analysis to determine the impact of new jobs on a
local economy) that each commuter would have on the economy of the
county in which he or she lives and notes that a multiple of two or
three generally is accepted by economic development analysts for most
areas. 65 FR 82233 (Dec. 27, 2000). ``Applying such a measure in the
case of a county with the minimum 25 percent commuting requirement
means that the incomes of at least half of the workers residing in the
outlying county are connected either directly (through commuting to
jobs located in the central county) or indirectly (by providing
services to local residents whose jobs are in the central county) to
the economy of the central county or counties of the CBSA within which
the county at issue qualifies for inclusion.'' 65 FR 82233 (Dec. 27,
2000). OMB has pointed out that a Federal agency using OMB's
statistical definitions is responsible for ensuring that the
definitions are appropriate for its particular use. NCUA is confident,
based on its experience, that it is using OMB's statistical definitions
in an appropriate manner.
The Board continues to favor the establishment of a standard
statistical definition of a WDLC. The Board believes that the
application of strictly statistical rules for determining whether a
CBSA is a WDLC has the advantage of minimizing ambiguity and making the
application process less time consuming. In addition to finding
evidence established in this manner compelling, the Board believed that
the reasonableness of the conclusion is further strengthened when
additional factors establishing the dominance of the core area are
present.
As OMB has noted, Metropolitan Divisions often function as distinct
social, economic, and cultural areas. In the Board's view, this
evidence detracts from the cohesiveness of a CBSA with Metropolitan
Divisions. Accordingly, under the proposal, a CBSA with Metropolitan
Divisions does not meet the definition of a WDLC. Individual
Metropolitan Divisions within the CBSA could qualify as a WDLC.
Similarly, the Board believes that when multiple political
jurisdictions are present, an overly large population can detract from
the cohesiveness of a geographic area. For that reason, the Board
proposed capping a multijurisdictional area at 2.5 million or less
people in order to qualify as a WDLC. The Board chose that population
threshold because OMB generally designates a Metropolitan Division
within a CBSA that has a core of at least 2.5 million people. The Board
takes that established threshold as a logical breaking point in terms
of community cohesiveness with respect to a multijurisdictional area.
Also, the Board acknowledged that not all areas of the country are
the same and there may be a CBSA that does not contain a sufficiently
dominant core area or contains several significant core areas. Such
situations also dilute the cohesiveness of a CBSA. For these reasons,
the Board proposed to require that a CBSA contain a dominant core city,
county, or equivalent that contains the majority of all jobs and \1/3\
of the total population contained in the CBSA in order to meet the
definition of a WDLC. These additional requirements were intended to
assure that the core area dominates any other area within the CBSA with
respect to jobs and population. Information about the current
definitions of CBSAs is available at OMB's Internet site (https://www.whitehouse.gov/omb). Community charter applications for part of a
CBSA are acceptable provided they include the dominant core city,
county, or equivalent and the CBSA's population in its entirety is 2.5
million or less people.
Accordingly, the Board proposed in 2009 to establish a statistical
definition of WDLC in cases involving multiple political jurisdictions.
Specifically, the proposal stated that a geographically well defined
area will be considered a WDLC in that context when the following four
requirements are met:
The area must be a recognized CBSA, or in the case of a
CBSA with Metropolitan Divisions the area must be a single Metropolitan
Division; and
The area must contain a dominant city, county or
equivalent with a majority of all jobs in the CBSA or Metropolitan
Division; and
The dominant city, county or equivalent must contain at
least \1/3\ of the CBSA's or Metropolitan Division's total population;
and
The area must have a population of 2.5 million or less
people.
As previously mentioned, NCUA believes this more objective approach
will benefit all involved by making the application and review process
faster, simpler, and less labor intensive, and will provide a more
certain outcome. Also, using objective criteria as the basis for
granting a community charter will help ensure that NCUA makes
[[Page 36260]]
consistent and uniform decisions from regional office to regional
office.
About a third of the commenters stated that an FCU should not have
to meet all four statistical criteria to establish a WDLC in areas
containing multiple political jurisdictions and believed these criteria
are too restrictive and exclude too many true communities from
qualifying as WDLCs. About half of these commenters suggested that
satisfying two of the four criteria should be sufficient to establish a
WDLC while others suggested substitute criteria. A handful of
commenters suggested that other areas such as MSAs and congressional
districts could also serve as presumed WDLCs. A third of the commenters
opposed the 2.5 million person population cap on multiple political
jurisdiction WDLCs. They thought it was too restrictive.
Upon further consideration, NCUA agrees that requiring compliance
with all four of the proposed criteria is overly restrictive and beyond
statutory requirements. More specifically, NCUA believes it is
unnecessary to include the employment and population requirements.
NCUA is confident in and agrees with OMB's extensive scientific
methodology employed in defining a CBSA and in concluding that the
existence of a CBSA demonstrates a high degree of social and economic
integration in a particular geographic area. Accordingly, NCUA believes
that including the majority of population and one third of employment
statistical criteria to establish a WDLC in areas containing multiple
political jurisdictions is overly restrictive. NCUA has concluded after
much deliberation that the majority of population and one third of
employment criteria are unnecessary, exceed statutory requirements, and
that a CBSA by definition, even without those additional criteria, is
sufficient to demonstrate the requisite social and economic integration
needed to establish a WDLC capable of supporting a viable credit union.
NCUA still believes, however, that any portion of a CBSA chosen as the
geographic area of the community must still contain the core of the
CBSA and that a total population cap of 2.5 million is appropriate in a
multiple political jurisdiction context to demonstrate cohesion in the
community. Those are also consistent with OMB guidance. Accordingly,
the final rule eliminates the majority of population and one third of
employment criteria from the statistical definition of a WDLC.
2. Narrative Approach
As previously mentioned, NCUA stated in the proposal that it does
not believe it is beneficial to continue the practice of permitting a
community charter applicant to provide a narrative statement with
documentation to support the credit union's assertion that an area
containing multiple political jurisdictions meets the standards for
community interaction and/or common interests to qualify as a WDLC. As
noted, the narrative approach is cumbersome, difficult for credit
unions to fully understand, and time consuming. Accordingly, NCUA
proposed eliminating, from the community chartering process, the
narrative approach and all related aspects of that procedure.
While not every area will qualify as a WDLC under the statistical
approach, NCUA stated it believes the consistency of this objective
approach will enhance its chartering policy, assure the strength and
viability of community charters, and greatly ease the burden for any
community charter applicant.
Well over half of the commenters opposed eliminating in its
entirety the narrative method of establishing a WDLC. Some of those
commenters supported using a narrative as supplemental evidence to the
statistical criteria. Others would like FCUs to have the choice of
establishing a WDLC using either the narrative or the statistical
criteria. NCUA continues to believe the narrative approach should be
eliminated for the reasons outlined above and is no longer available in
the final rule.
3. Grandfathered WDLCs
NCUA stated in the proposal that an area previously approved by
NCUA as a WDLC, prior to the effective date of any final amendments,
will continue to be considered a WDLC for subsequent applicants who
wish to serve that exact geographic area. After that effective date, an
applicant applying for a geographic area that is not exactly the same
as the previously approved WDLC must comply with the Chartering
Manual's WDLC criteria then in place.
Over a third of the commenters noted their support for NCUA's
decision to grandfather all previously approved WDLCs. The banking
trade group opposed that position. Previously approved WDLCs were
established as such under legally appropriate standards and, therefore,
NCUA believes those areas should continue to be considered WDLCs as
part of the final rule.
4. Rural District
In the 2009 proposal, the Board proposed to define the term ``rural
district'' to help extend credit union services to individuals living
in rural America without adequate access to reasonably priced financial
services. Specifically, the NCUA Board defined a rural district as a
contiguous area that has more than 50% of its population in census
blocks that are designated as rural and the total population of the
area does not exceed 100,000 persons, stating that these requirements
will ensure that a rural district has both a small total population and
a majority of its population in areas classified as rural by the United
States Census Bureau.
In the 2007 proposal, the Board proposed a different definition of
rural district. Specifically, the Board defined rural district as an
area that is not in an MSA or MicroSA, has a population density that
does not exceed 100 people per square mile, and where the total
population does not exceed 100,000. That definition would have excluded
the majority of the United States population that lives in and around
large urban areas yet, based on census data, still include the vast
majority of counties in the United States having fewer than 100,000
persons. Population density varies widely but many counties also have a
density of less than 100 persons per square mile. Those requirements
would have assured that an area under consideration as a rural district
would have a small total population and a relatively light population
density.
Over half of the commenters opposed the 2009 proposed definition of
rural district primarily because they believe the 100,000 person
population cap is too small. Some commenters stated the 100,000 person
limit is too small to sustain a viable FCU considering the lack of
economies of scale and the fact that community chartered credit unions
generally have a lower penetration rate than other kinds of credit
union charters. A few commenters noted that many truly rural areas
contain a small hub city which when included in the area would exceed
the 100,000 person population limit. Some commenters stated that if
NCUA chooses to impose a population limit, then it should be higher.
NCUA has also received comment that it is more difficult for an FCU
to reach and attract members from individuals living in large rural
areas with widely disbursed populations. Those members are often more
expensive to serve than members in a smaller geographic area with a
higher
[[Page 36261]]
population concentration. In addition, the penetration rate of
community charters is significantly less than single or multiple common
bond charters and, therefore, a higher population limit is necessary to
ensure economic viability. Accordingly, NCUA believes it is warranted
to increase the population limit to 200,000 people. This will help
ensure the rural district criteria are realistic and that an FCU can be
viable in serving a rural district given the economic realities of an
FCU's cost to serve rural members. Also, NCUA wishes to clarify that in
defining a rural district, NCUA recognizes four types of affinity on
which a rural district can be based--persons who live in, worship in,
attend school in, or work in the rural district. Businesses and other
legal entities within the rural district may also qualify for
membership.
NCUA believes the creation of rural districts will play a
significant role in allowing FCUs to provide affordable financial
services to individuals in rural communities that otherwise would not
have such services. To that end and to provide as much flexibility as
reasonably possible, NCUA is expanding the definition of rural district
so that an FCU can establish a rural district by satisfying either the
definition of rural district proposed in the 2009 proposal, with the
modified population limit, or a definition similar to that proposed in
the 2007 proposal, also with the modified population limit.
Specifically, NCUA defines rural district in the final rule as:
A district that has well-defined, contiguous geographic
boundaries;
More than 50% of the district's population resides in
census blocks or other geographic areas that are designated as rural by
the United States Census Bureau; and
The total population of the district does not exceed
200,000 people; or
A district that has well-defined, contiguous geographic
boundaries;
The district does not have a population density in excess
of 100 people per square mile; and
The total population of the district does not exceed
200,000 people.
5. Underserved Communities
In December 2008, NCUA adopted a final rule modifying its
Chartering Manual to update and clarify four aspects of the process and
criteria for approving credit union service to underserved areas. 73 FR
73392 (Dec. 2, 2008). First, the rule clarified that an underserved
area must independently qualify as a WDLC. Second, it made explicit
that the Community Development Financial Institution Fund's
``geographic units'' of measure and 85 percent population threshold,
when applicable, must be used to determine whether a proposed area
meets the ``criteria of economic distress'' incorporated by reference
in the FCU Act. Third, it updated the documentation requirements for
demonstrating that a proposed area has ``significant unmet needs''
among a range of specified financial products and services. Finally,
the rule adopted a ``concentration of facilities'' methodology to
implement the statutory requirement that a proposed area must be
``underserved by other depository institutions.'' 73 FR 73392, 73396
(Dec. 2, 2008).
Using data supplied by NCUA, the ``concentration of facilities''
methodology compares the ratio of depository institution facilities to
the population within a proposed area's ``non-distressed'' portions
against the same facilities-to-population ratio in the proposed area as
a whole. When that ratio in the area as a whole shows more persons per
facility than does the same ratio in the ``non-distressed'' portions,
the rule deems the area to be ``underserved by other depository
institutions.'' There is a perception that this methodology measures
only the presence of financial institutions not the variety of services
and, therefore, it may be an obstacle to establishing that an area
which clearly meets the ``economic distress criteria'' also is
``underserved by other depository institutions'' as required for the
area to qualify as underserved. For example, there could be a
distressed area that contains more financial institutions than a non-
distressed area, but the products and services offered by the financial
institutions in the distressed area might focus on businesses and high-
income individuals. In this instance, the distressed area would not
qualify as underserved despite truly lacking affordable financial
services for low to moderate income individuals.
In the 2009 proposal, the NCUA Board solicited public comment on
alternative methodologies, based on publicly accessible data about both
credit unions and other depository institutions, for implementing the
Act's ``underserved by other depository institutions'' criterion.
A quarter of the commenters opposed NCUA's current methodology for
determining if an area is underserved. About the same number of
commenters stated that an underserved area should not have to satisfy
the same criteria as a WDLC. Unfortunately, commenters did not
articulate with any semblance of consensus a realistic alternate
methodology. Accordingly, NCUA will continue with the current
methodology until a better option is devised.
6. Ability To Serve and Marketing Plans
Establishing that an area is a WDLC is only the first of two
criteria an FCU must satisfy to obtain a community charter or community
charter expansion. The second criterion, after establishing the
existence of a WDLC, is for an FCU to demonstrate it is able to serve
the WDLC. This applies to all WDLCs including SPJs, statistical areas,
and grandfathered communities. Typically, an FCU can demonstrate its
ability to serve an established WDLC in its marketing plan.
Under the current Chartering Manual, a credit union converting to
or expanding its community charter must provide, ``a marketing plan
that addresses how the community will be served.'' In the 2009
proposal, the Board clarified NCUA's marketing plan requirement to
provide credit unions with additional guidance on NCUA's expectations.
NCUA proposed that a meaningful marketing plan must demonstrate, in
detail:
How the credit union will implement its business plan to
serve the entire community;
The unique needs of the various demographic groups in the
proposed community;
How the credit union will market to each group,
particularly underserved groups;
Which community-based organizations the credit union will
target in its outreach efforts;
The credit union's marketing budget projections dedicating
greater resources to reaching new members; and
The credit union's timetable for implementation, not just
a calendar of events.
Additionally, the Board proposed that the appropriate regional
office will follow-up with an FCU every year for three years after the
FCU has been granted a new or expanded community charter, and at any
other intervals NCUA believes appropriate, to determine if the FCU is
satisfying the terms of its marketing and business plans. An FCU
failing to satisfy those terms would be subject to supervisory action.
Almost two thirds of the commenters objected to NCUA reviewing an
FCU's compliance with the terms of its marketing plan after the FCU has
been granted a new or expanded community charter. Most of those
commenters stated that as economic and other conditions change over
time an FCU must make adjustments to its plan. They
[[Page 36262]]
indicated a plan must be fluid and not rigid and that FCUs should be
afforded this flexibility. Over a quarter of commenters indicated that
NCUA should provide more information as to how NCUA will determine if
an FCU is satisfying the terms of its marketing plan and what
supervisory action could be taken if NCUA determines an FCU is not
doing so. NCUA fully recognizes the need for flexibility in this
context. An FCU must adapt to changing economic circumstances and it is
reasonable for its marketing plan to evolve accordingly. It was not
NCUA's intent in the 2009 proposal to suggest otherwise. Accordingly,
this aspect of the 2009 proposal remains unchanged in the final rule,
but NCUA's stresses plan rigidity is not its goal. NCUA simply wants to
make certain an FCU that is granted a community charter makes a
continuing good faith effort to serve that community as it indicated it
would in its marketing plan. NCUA did not specify exactly what kinds of
supervisory action might be taken for failure of an FCU to comply with
its marketing plan because those decisions are best left to a case-by-
case determination depending on the nature of the circumstances. In any
event, NCUA intends to provide an FCU with flexibility to comply with
or reasonably alter its marketing plan as dictated by circumstances.
7. Emergency Mergers
Under the emergency merger provision of section 205(h) of the Act,
the NCUA Board may allow a credit union that is either insolvent or in
danger of insolvency to merge with another credit union if the NCUA
Board finds that an emergency requiring expeditious action exists, no
other reasonable alternatives are available, and the action is in the
public interest. 12 U.S.C. 1785(h). The Board may approve an emergency
merger without regard to common bond or other legal constraints, such
as obtaining the approval of the members of the merging credit union to
the merger.
NCUA must first determine that a credit union is either insolvent
or in danger of insolvency before it makes the additional findings that
an emergency exists, other alternatives are not reasonably available,
and that the public interest would be served by the merger. The
statute, however, does not define when a credit union is ``in danger of
insolvency.'' In the 2009 proposal, NCUA adopted an objective standard
to aid it in making the ``in danger of insolvency'' determination and
provide certainty and consistency in how NCUA interprets the standard.
Specifically, NCUA proposed that a credit union is in danger of
insolvency if it falls into one or more of the following three
categories:
1. The credit union's net worth is declining at a rate that will
render it insolvent within 24 months. In NCUA's experience with
troubled credit unions, the trend line to zero net worth often worsens
once a credit union actually approaches zero net worth. It is more
difficult for NCUA to keep the costs to the National Credit Union Share
Insurance Fund (NCUSIF) low when a credit union is near, or below, zero
net worth.\1\
---------------------------------------------------------------------------
\1\ Under NCUA's system of prompt corrective action (PCA), as a
credit union's net worth declines below minimum requirements, the
credit union faces progressively more stringent safeguards. The goal
is to resolve net worth deficiencies promptly, before they become
more serious, and in any event before they cause losses to the
NCUSIF. The PCA statute sets forth NCUA's duty to take prompt
corrective action to resolve the problems of troubled credit unions
to avoid or minimize loss to the NCUSIF. S. Rpt. No. 193, 105th
Cong., 2d Sess. 12 (1998); 12 U.S.C. 1790d; 12 CFR part 702.
---------------------------------------------------------------------------
2. The credit union's net worth is declining at a rate that will
take it under two percent (2%) net worth within 12 months. A credit
union with a net worth ratio of less than two percent (2%) falls into
the PCA category of ``critically undercapitalized.'' 12 U.S.C.
1790d(c)(1)(E); 12 CFR 702.102(a)(5). Congress, in adding the PCA
mandates to the Act, created a presumption that a critically
undercapitalized credit union should be liquidated or conserved if its
financial condition does not improve within a short period. 12 U.S.C.
1790d(i); 12 CFR 702.204(c).
3. The credit union's net worth, as self-reported on its Call
Report, is significantly undercapitalized, and NCUA determines that
there is no reasonable prospect of the credit union becoming adequately
capitalized in the succeeding 36 months. A credit union with a net
worth ratio between two percent (2%) or more but less than four percent
(4%) falls into the PCA category of ``significantly undercapitalized.''
12 U.S.C. 1790d(c)(1)(D); 12 CFR 702.102(a)(4). A credit union with a
net worth ratio of six percent (6%) falls into the PCA category of
``adequately capitalized.'' 12 U.S.C. 1709d(c)(1)(B); 12 CFR
702.102(a)(2).
Section 702.203(c) of NCUA's PCA regulation states:
Discretionary conservatorship or liquidation if no prospect of
becoming ``adequately capitalized.'' Notwithstanding any other
actions required or permitted to be taken under this section, when a
credit union becomes ``significantly undercapitalized'' * * *, the
NCUA Board may place the credit union into conservatorship pursuant
to 12 U.S.C. 1786(h)(1)(F), or into liquidation pursuant to 12
U.S.C. 1787(a)(3)(A)(i), provided that the credit union has no
reasonable prospect of becoming ``adequately capitalized.''
12 CFR 702.203(c). An example of no reasonable prospect of becoming
adequately capitalized would be a credit union's inability, after
working with NCUA, to demonstrate how it would restore net worth to
this level. This could include the credit union's failure, after
working with NCUA, and considering both possible increases in retained
earnings and decreases in assets, to develop an acceptable Net Worth
Restoration Plan (NWRP). It could also include the credit union's
failure, after working with NCUA, to materially comply with an approved
NWRP. In either case, NCUA must document that the credit union is
unable to become adequately capitalized within a 36-month timeframe.
A major credit union trade association and the banking trade
association supported NCUA's definition of ``in danger of insolvency''
as proposed. Another major credit union trade association opposed it
stating that it gave NCUA latitude to conduct an emergency merger if an
FCU is significantly undercapitalized regardless of other supervisory
issues that might suggest a merger is not necessary. NCUA continues to
believe the proposed definition is reasonable and balanced and serves
the public interest. The definition lends certainty to how NCUA will
determine that an FCU is in danger of insolvency. Some commenters want
NCUA to make the determination earlier in the process when the
distressed FCU is still an attractive merger partner and others want
NCUA to wait longer. All commenters are reminded that, in either event,
NCUA is bound by statutory limits on non-emergency mergers of credit
unions with dissimilar charters. The proposed definition is finalized
without change.
8. Delegations of Processing Authority
Although NCUA did not ask for comments in this regard, a few
commenters suggested NCUA's regional offices should be delegated
authority to process to completion any community related FOM
application without input from the Board or concurrence of other NCUA
offices. NCUA agrees this would expedite processing community charter
applications and will review its procedures.
C. Regulatory Procedures
Regulatory Flexibility Act
The Regulatory Flexibility Act requires NCUA to prepare an analysis
to
[[Page 36263]]
describe any significant economic impact a rule may have on a
substantial number of small entities (primarily those under ten million
dollars in assets). This rule will not have a significant economic
impact on a substantial number of small credit unions, and therefore,
no regulatory flexibility analysis is required.
Small Business Regulatory Enforcement Fairness Act
The Small Business Regulatory Enforcement Fairness Act (SBREFA) of
1996, Public Law 104-121, provides generally for congressional review
of agency rules. A reporting requirement is triggered in instances
where NCUA issues a final rule as defined by Section 551 of the
Administrative Procedures Act. 5 U.S.C. 551. The Office of Information
and Regulatory Affairs, an office within OMB, is currently reviewing
this rule, and NCUA anticipates it will determine that, for purposes of
SBREFA, this is not a major rule.
Paperwork Reduction Act
In accordance with the requirements of the Paperwork Reduction Act
of 1995 (PRA), NCUA may not conduct or sponsor, and the respondent is
not required to respond to, an information collection unless it
displays a currently valid OMB control number. The OMB control number
assigned to Sec. 701.1 is 3133-0015, and to the forms included in
Appendix D is 3133-0116. NCUA has determined that the amendments will
not increase paperwork requirements and a paperwork reduction analysis
is not required.
Executive Order 13132
Executive Order 13132 encourages independent regulatory agencies to
consider the impact of their actions on state and local interests. In
adherence to fundamental federalism principles, NCUA, an independent
regulatory agency as defined in 44 U.S.C. 3502(5), voluntarily complies
with the executive order. This final rule will not have a substantial
direct effect on the states, on the relationship between the national
government and the states, or on the distribution of power and
responsibilities among the various levels of government. NCUA has
determined that this final rule does not constitute a policy that has
federalism implications for purposes of the executive order because it
only applies to FCUs.
The Treasury and General Government Appropriations Act, 1999--
Assessment of Federal Regulations and Policies on Families
NCUA has determined that this final rule will not affect family
well-being within the meaning of section 654 of the Treasury and
General Government Appropriations Act, 1999, Public Law 105-277, 112
Stat. 2681 (1998).
List of Subjects in 12 CFR Part 701
Credit, Credit unions, Reporting and recordkeeping requirements.
By the National Credit Union Administration Board on June 17,
2010
Mary Rupp,
Secretary of the Board.
0
For the reasons discussed above, NCUA amends 12 CFR part 701 as
follows:
PART 701--ORGANIZATION AND OPERATIONS OF FEDERAL CREDIT UNIONS
0
1. The authority citation for part 701 continues to read as follows:
Authority: 12 U.S.C. 1752(5), 1755, 1756, 1757, 1759, 1761a,
1761b, 1766, 1767, 1782, 1784, 1787, 1789. Section 701.6 is also
authorized by 15 U.S.C. 3717. Section 701.31 is also authorized by
15 U.S.C. 1601, et seq., 42 U.S.C. 1981 and 3601-3610. Section
701.35 is also authorized by 12 U.S.C. 4311-4312.
0
2. Section 701.1 is revised to read as follows:
Sec. 701.1 Federal credit union chartering, field of membership
modifications, and conversions.
National Credit Union Administration policies concerning
chartering, field of membership modifications, and conversions, also
known as the Chartering and Field of Membership Manual, are set forth
in appendix B to this part and are available on-line at https://www.ncua.gov.
0
3. The first paragraph of Section II.D.2. of Chapter 2 of appendix B to
part 701 is revised to read as follows:
Appendix B to Part 701--Chartering and Field of Membership Manual
* * * * *
II.D.2--Emergency Mergers
An emergency merger may be approved by NCUA without regard to
common bond or other legal constraints. An emergency merger involves
NCUA's direct intervention and approval. The credit union to be
merged must either be insolvent or in danger of insolvency, as
defined in the Glossary, and NCUA must determine that:
An emergency requiring expeditious action exists;
Other alternatives are not reasonably available; and
The public interest would best be served by approving
the merger.
* * * * *
0
4. The first paragraph of Section III.D.2. of Chapter 2 of appendix B
to part 701 is revised to read as follows:
III.D.2--Emergency Mergers
An emergency merger may be approved by NCUA without regard to
common bond or other legal constraints. An emergency merger involves
NCUA's direct intervention and approval. The credit union to be
merged must either be insolvent or in danger of insolvency, as
defined in the Glossary, and NCUA must determine that:
An emergency requiring expeditious action exists;
Other alternatives are not reasonably available; and
The public interest would best be served by approving
the merger.
* * * * *
0
5. The first paragraph of Section IV.D.3. of Chapter 2 of appendix B to
part 701 is revised to read as follows:
IV.D.3--Emergency Mergers
An emergency merger may be approved by NCUA without regard to
common bond or other legal constraints. An emergency merger involves
NCUA's direct intervention and approval. The credit union to be
merged must either be insolvent or in danger of insolvency, as
defined in the Glossary, and NCUA must determine that:
An emergency requiring expeditious action exists;
Other alternatives are not reasonably available; and
The public interest would best be served by approving
the merger.
* * * * *
0
6. Section V.A. of Chapter 2 of appendix B to part 701 is revised to
read as follows:
Chapter 2
V.A.1--General
There are two types of community charters. One is based on a
single, geographically well-defined local community or neighborhood;
the other is a rural district. More than one credit union may serve
the same community.
NCUA recognizes four types of affinity on which both a community
charter and a rural district can be based--persons who live in,
worship in, attend school in, or work in the community or rural
district. Businesses and other legal entities within the community
boundaries or rural district may also qualify for membership.
NCUA has established the following requirements for community
charters:
The geographic area's boundaries must be clearly
defined; and
The area is a well-defined local community or a rural
district.
[[Page 36264]]
V.A.2--Definition of Well-Defined Local Community and Rural District
In addition to the documentation requirements in Chapter 1 to
charter a credit union, a community credit union applicant must
provide additional documentation addressing the proposed area to be
served and community service policies.
An applicant has the burden of demonstrating to NCUA that the
proposed community area meets the statutory requirements of being:
(1) well-defined, and (2) a local community or rural district.
``Well-defined'' means the proposed area has specific geographic
boundaries. Geographic boundaries may include a city, township,
county (single, multiple, or portions of a county) or their
political equivalent, school districts, or a clearly identifiable
neighborhood. Although congressional districts and state boundaries
are well-defined areas, they do not meet the requirement that the
proposed area be a local community or rural district.
The well-defined local community requirement is met if:
Single Political Jurisdiction--The area to be served is
in a recognized single political jurisdiction, i.e., a city, county,
or their political equivalent, or any contiguous portion thereof.
Statistical Area--
The area is a designated Core Based Statistical Area
(CBSA) or allowing part thereof, or in the case of a CBSA with
Metropolitan Divisions, the area is a Metropolitan Division or part
thereof; and
The CBSA or Metropolitan Division must have a
population of 2.5 million or less people.
The rural district requirement is met if:
Rural District--
The district has well-defined, contiguous geographic
boundaries;
More than 50% of the district's population resides in
census blocks or other geographic areas that are designated as rural
by the United States Census Bureau; and
The total population of the district does not exceed
200,000 people; or
The district has well-defined, contiguous geographic
boundaries;
The district does not have a population density in
excess of 100 people per square mile; and
The total population of the district does not exceed
200,000 people.
The affinities that apply to rural districts are the same as
those that apply to well defined local communities. The OMB
definitions of CBSA and Metropolitan Division may be found at 65
FR82238 (Dec. 27, 2000). They are incorporated herein by reference.
Access to these definitions is available through the main page of
the Federal Register Web site at https://www.gpoaccess.gov/fr/ and on NCUA's Web site at https://www.ncua.gov.
The requirements in Chapter 2, Sections V.A.4 through V.G. also
apply to a credit union that serves a rural district.
V.A.3--Previously Approved Communities
If prior to July 26, 2010 NCUA has determined that a specific
geographic area is a well defined local community, then a new
applicant need not reestablish that fact as part of its application
to serve the exact area. The new applicant must, however, note
NCUA's previous determination as part of its overall application. An
applicant applying for an area after that date that is not exactly
the same as the previously approved well defined local community
must comply with the current criteria in place for determining a
well defined local community.
V.A.4--Business Plan Requirements for a Community Credit Union
A community credit union is frequently more susceptible to
competition from other local financial institutions and generally
does not have substantial support from any single sponsoring company
or association. As a result, a community credit union will often
encounter financial and operational factors that differ from an
occupational or associational charter. Its diverse membership may
require special marketing programs targeted to different segments of
the community. For example, the lack of payroll deduction creates
special challenges in the development and promotion of savings
programs and in the collection of loans. Accordingly, to support an
application for a community charter, an applicant Federal credit
union must develop a business plan incorporating the following data:
Pro forma financial statements for a minimum of 24
months after the proposed conversion, including the underlying
assumptions and rationale for projected member, share, loan, and
asset growth;
Anticipated financial impact on the credit union,
including the need for additional employees and fixed assets, and
the associated costs;
A description of the current and proposed office/branch
structure, including a general description of the location(s);
parking availability, public transportation availability, drive-
through service, lobby capacity, or any other service feature
illustrating community access;
A marketing plan addressing how the community will be
served for the 24-month period after the proposed conversion to a
community charter, including detailing: how the credit union will
implement its business plan; the unique needs of the various
demographic groups in the proposed community; how the credit union
will market to each group, particularly underserved groups; which
community-based organizations the credit union will target in its
outreach efforts; the credit union's marketing budget projections
dedicating greater resources to reaching new members; and the credit
union's timetable for implementation, not just a calendar of events;
Details, terms and conditions of the credit union's
financial products, programs, and services to be provided to the
entire community; and
Maps showing the current and proposed service
facilities, ATMs, political boundaries, major roads, and other
pertinent information.
An existing Federal credit union may apply to convert to a
community charter. Groups currently in the credit union's field of
membership, but outside the new community credit union's boundaries,
may not be included in the new community charter. Therefore, the
credit union must notify groups that will be removed from the field
of membership as a result of the conversion. Members of record can
continue to be served.
Before approval of an application to convert to a community
credit union, NCUA must be satisfied that the credit union will be
viable and capable of providing services to its members.
Community credit unions will be expected to regularly review and
to follow, to the fullest extent economically possible, the
marketing and business plans submitted with their applications.
Additionally, NCUA will follow-up with an FCU every year for three
years after the FCU has been granted a new or expanded community
charter, and at any other intervals NCUA believes appropriate, to
determine if the FCU is satisfying the terms of its marketing and
business plans. An FCU failing to satisfy those terms will be
subject to supervisory action. As part of this review process, the
regional office will report to the NCUA Board instances where an FCU
is failing to satisfy the terms of its marketing and business plan
and indicate what supervisory actions the region intends to take.
V.A.5--Community Boundaries
The geographic boundaries of a community Federal credit union
are the areas defined in its charter. The boundaries can usually be
defined using political borders, streets, rivers, railroad tracks,
or other static geographical feature.
A community that is a recognized legal entity may be stated in
the field of membership--for example, ``Gus Township, Texas,''
``Isabella City, Georgia,'' or ``Fairfax County, Virginia.''
A community that is a recognized CBSA must state in the field of
membership the political jurisdiction(s) that comprise the CBSA.
V.A.6--Special Community Charters
A community field of membership may include persons who work or
attend school in a particular industrial park, shopping mall, office
complex, or similar development. The proposed field of membership
must have clearly defined geographic boundaries.
V.A.7--Sample Community Fields of Membership
A community charter does not have to include all four affinities
(i.e., live, work, worship, or attend school in a community). Some
examples of community fields of membership are:
Persons who live, work, worship, or attend school in,
and businesses located in the area of Johnson City, Tennessee,
bounded by Fern Street on the north, Long Street on the east, Fourth
Street on the south, and Elm Avenue on the west;
Persons who live or work in Green County, Maine;
Persons who live, worship, work (or regularly conduct
business in), or attend school on the University of Dayton campus,
in Dayton, Ohio;
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Persons who work for businesses located in Clifton
Country Mall, in Clifton Park, New York;
Persons who live, work, or worship in the Binghamton,
New York, CBSA, consisting of Broome and Tioga Counties, New York (a
qualifying CBSA in its entirety);
Persons who live, work, worship, or attend school in
the portion of the Oklahoma City, OK MSA that includes Canadian and
Oklahoma counties, Oklahoma (two contiguous counties in a portion of
a qualifying CBSA that has seven counties in total); or
Persons who live, work, worship, or attend school in
Uinta County or Lincoln County, Wyoming, a rural district.
Some examples of insufficiently defined local communities,
neighborhoods, or rural districts are:
Persons who live or work within and businesses located
within a ten-mile radius of Washington, DC (using a radius does not
establish a well-defined area);
Persons who live or work in the industrial section of
New York, New York. (not a well-defined neighborhood, community, or
rural district); or
Persons who live or work in the greater Boston area.
(not a well-defined neighborhood, community, or rural district).
Some examples of unacceptable local communities, neighborhoods,
or rural districts are:
Persons who live or work in the State of California.
(does not meet the definition of local community, neighborhood, or
rural district).
Persons who live in the first congressional district of
Florida. (does not meet the definition of local community,
neighborhood, or rural district).
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7. The first paragraph of Section V.D.2. of Chapter 2 of appendix B to
part 701 is revised to read as follows:
V.D.2--Emergency Mergers
An emergency merger may be approved by NCUA without regard to
common bond or other legal constraints. An emergency merger involves
NCUA's direct intervention and approval. The credit union to be
merged must either be insolvent or in danger of insolvency, as
defined in the Glossary, and NCUA must determine that:
An emergency requiring expeditious action exists;
Other alternatives are not reasonably available; and
The public interest would best be served by approving
the merger.
* * * * *
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8. Section III.B.1 of Chapter 3 of appendix B to part 701 is amended by
removing the last sentence of that section.
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9. In Appendix B to part 701, revise Appendix 1 to read as follows:
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[FR Doc. 2010-15130 Filed 6-24-10; 8:45 am]
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