[Federal Register: December 29, 2009 (Volume 74, Number 248)]
[Proposed Rules]
[Page 68722-68731]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29de09-26]
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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: Proposed rule.
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SUMMARY: The NCUA Board proposes to amend 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: Comments must be postmarked or received by March 1, 2010.
ADDRESSES: You may submit comments by any of the following methods
(Please send comments by one method only):
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
NCUA Web site: http://www.ncua.gov/
RegulationsOpinionsLaws/proposedregs/proposedregs.html. Follow the
instructions for submitting comments.
E-mail: Address to regcomments@ncua.gov. Include ``[Your
name] Comments on Proposed Rule IRPS 09-1,'' in the e-mail subject
line.
Fax: (703) 518-6319. Use the subject line described above
for e-mail.
Mail: Address to Mary F. Rupp, Secretary of the Board,
National Credit Union Administration, 1775 Duke Street, Alexandria,
Virginia 22314-3428.
Hand Delivery/Courier: Same as mail address.
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 Overview
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 (``FCUA'') grants the NCUA Board broad general
rulemaking authority over Federal credit unions. 12 U.S.C. 1766(a). In
passing CUMAA, Congress amended the FCUA 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. The
Board is aware that there is considerable uncertainty among community
charter applicants regarding two important issues, particularly in
connection with applications involving large multi-jurisdictional
areas. The first is how an applicant can best demonstrate the requisite
interaction and/or shared common interests of a WDLC. The second is how
much evidence is required in a particular case. The primary purpose of
this proposal is to eliminate that uncertainty and conserve the
economic and human resources of applicants and NCUA. To this end, the
Board proposes to define WDLC in terms of objective and quantifiable
criteria that, in the Board's opinion, conclusively demonstrate
interaction and/or common interests.
Using objective and easy to apply criteria will replace the
current, burdensome practice of requiring an applicant to demonstrate
the existence of a WDLC using a narrative approach with supporting
documents. This approach will enable applicants to easily, quickly, and
inexpensively determine, with certainty, if the geographic area they
wish to serve is a WDLC.
Under the current proposal, as discussed more fully below, a
geographic area would automatically qualify as a WDLC in the following
three ways:
1. As a single political jurisdiction less than an entire State, or
a defined portion of that single political jurisdiction;
2. As a statistical area limited to 2.5 million or less people, so
designated by the Office of Management and Budget (OMB), if it has a
single core area and the core satisfies a concentration threshold for
employment and population or as a portion of that statistical area
provided the smaller area independently meets the same employment and
population requirements; and
3. As an existing, previously approved area ``grandfathered'' for
use by future applicants.
Additionally, the NCUA Board proposes to define the term ``rural
district'' for chartering purposes. The Board believes this will help
extend credit union services to individuals living in rural America
without adequate access to reasonably priced financial services.
Finally, the Board proposes to provide community charter applicants
with more detailed guidance on NCUA's expectations regarding the
adequacy of an applicant's business and marketing plans required as
part of the charter application.
[[Page 68723]]
B. Current Community Charter Rules
In the single political jurisdiction context, it is easy to
demonstrate that an area is a WDLC, a single, geographically well-
defined local community or neighborhood where individuals have common
interests and/or interact. A single political jurisdiction such as a
city, county, or their political equivalent or any contiguous portion
thereof automatically qualifies as a WDLC.
It is much more complicated, however, for an applicant to
demonstrate that an area comprised of multiple, contiguous political
jurisdictions is a WDLC. In that instance, the current rules require a
credit union to submit a narrative describing how the area meets the
standards for community interaction and/or common interests with
supporting documentation. Supporting documentation often includes
information regarding commuting patterns, employment patterns, major
trade areas, shared common facilities, organizations and clubs within
the requested area, newspaper penetration, festivals, and entertainment
centers. Compiling this potentially voluminous amount of information
can be difficult, time consuming, and expensive for the applicant and
is a wasted effort in those instances where the narrative and
supporting documents do not sufficiently make the case for the
existence of a WDLC.
Because the nature of the supporting documentation can be
subjective, it is time consuming and labor intensive for NCUA to review
a narrative application. As part of the process, NCUA often requests
the applicant clarify some of the information provided or supply
additional information to help NCUA properly analyze the application in
accordance with the requirements of the Chartering Manual. While
requesting more or clarified information is often necessary for NCUA to
make a decision, it increases the credit union's time and expense of
preparing a community charter application.
Another problem related to NCUA determining that a multiple,
contiguous political jurisdiction is a WDLC based on a narrative
application is the risk of litigation. Because the narrative approach
is inherently a subjective one, it is vulnerable to legal challenges.
NCUA believes it would benefit all involved to eliminate the great
expense, effort, and uncertainty associated with the narrative approach
in favor of a simpler, more objective method.
Finally, NCUA believes the absence of a regulatory definition of
``rural district'' in NCUA's current chartering rules is an impediment
to expanding credit union services to individuals in rural areas.
C. May 2007 Proposal
The NCUA Board issued proposed revisions to the Chartering Manual
in May 2007 to clarify and amend NCUA's community chartering policies
and solicited public comment on the proposed amendments. 72 FR 30988
(June 5, 2007). In that rulemaking, NCUA sought to clarify the meaning
of WDLC. Specifically, the proposal identified single political
jurisdictions and statistical areas as presumptive WDLCs and required a
credit union seeking a local community consisting of multiple political
jurisdictions, if not a presumed WDLC, to provide a narrative with
documentation to support that the requested geographical area meets the
standards for community interaction and/or common interests. While the
May 2007 proposal embraced using more objective standards to determine
whether a particular area is a WDLC, it continued to allow community
charter applicants to submit narrative applications with supporting
documentation in the multiple, political jurisdictions context where
there was no presumed WDLC. For the reasons discussed above, that
aspect of the proposal is undesirable and would perpetuate the
inefficiencies of the current process.
The 2007 proposal also provided that when the narrative approach
was required to support the existence of a WDLC, a public notice and
comment period would be used to inform the public about the application
and assist NCUA in determining if the area was a WDLC. At the time, the
Board thought a 30-day public notice and comment period might assist it
in its critical analysis of the evidence and provide the public with an
opportunity to provide timely comments and relevant information on the
proposed local community. The notice and comment provision has become
moot because the NCUA Board is proposing to eliminate the continued use
of the narrative application.
NCUA had not attempted to define the term ``rural district'' prior
to the 2007 proposal, although there is statutory language authorizing
credit unions to be chartered to serve a rural district. Rural
districts tend to lack the traditional characteristics of interaction
or shared common interests found in WDLCs. In 2007, the Board proposed
a definition of rural district stating it expected a rural district
would be less densely populated than WDLCs NCUA had considered in the
past and noted that rural districts frequently lack any centralized
urban core or cluster. The Board also stated that although a proposed
rural district may include contiguous counties it believed such a
district should have a relatively small, widely disbursed, population.
The Board proposed to define a rural district as an area that is not in
a metropolitan statistical area (MSA) or micropolitan statistical area
(MicroSA), as those terms are defined below, 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.
When developing that proposed definition, the Board considered the
criteria other executive branch agencies use as a framework for
defining what is rural in the United States. These agencies are the
U.S. Census Bureau (Census), OMB, and the Economic Research Service
(ERS) of the U.S. Department of Agriculture (USDA). The following table
summarizes each agency's definition of what constitutes a rural area.
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Definition of rural area
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Census........................ The Census Bureau defines rural area by
exclusion by considering areas outside
urbanized areas or urban clusters
rural.
The Census defines an urbanized
area as an area consisting of adjacent,
densely settled, census block groups
and census blocks that meet minimum
population density requirements. The
urbanized area definition also includes
adjacent densely settled census blocks
that collectively have a population of
at least 50,000 people.
[[Page 68724]]
The Census defines urban
clusters as contiguous, densely
settled, census block groups and census
blocks that meet minimum population
density requirements. This definition
also includes adjacent densely settled
census blocks that collectively have
populations ranging from 2,500 to less
than 50,000 people.
The Census Bureau relies upon
the standards implemented by the OMB,
as discussed below, for classifying
areas as metropolitan areas.
The Census Bureau considers all other
areas rural. [Reference: http://
frwebgate.access.gpo.gov/cgi-bin/
getdoc.cgi?dbname=2002_register&docid=
02-6186-filed.pdf.]
OMB........................... The OMB defines MSAs, or metropolitan
areas, as central (core) counties with
one or more urbanized areas, and
outlying counties that are economically
tied to the core counties as measured
by work commuting. OMB uses the MicroSA
classification to identify a non-metro
county with an urban cluster of at
least 10,000 persons or more. Non-core
counties are neither micro nor metro.
Agencies outside of OMB often designate
non-metro counties as rural.
[Reference: http://www.whitehouse.gov/
omb/bulletins/fy2007/b07-01.pdf.]
ERS........................... ERS of the USDA considers areas rural if
the OMB has not designated any part of
the area as an MSA or core county.
ERS also consider some areas designated
by OMB as MSAs rural based on their
assessments of Census data and other
agency research. ERS has developed
several classifications to measure
rurality within individual MSAs.
ERS researchers who discuss conditions
in rural America refer to non-MSA areas
that include both micropolitan and non-
core counties as rural areas. When the
OMB classifies an area as a MicroSA,
the ERS still considers these areas
rural according to their definition.
Rurality is a term used by the USDA ERS
to explain the rural nature of an area.
[Reference: http://www.ers.usda.gov/
Briefing/Rurality/WhatIsRural/.]
------------------------------------------------------------------------
The Census Bureau, the OMB, and the ERS all provide definitions of
rurality based on their analysis of 2000 census data. See 72 FR 30988,
30992 (June 5, 2007).
After a review of the comments, and upon further consideration, the
Board believes the definition of rural district proposed in 2007 does
not adequately reflect the unique nature of rural areas. Accordingly,
the Board proposes a revised definition of rural district in the
current proposal, as discussed below, that it believes is easier to
apply and better reflects NCUA's goal to use a simpler, more objective
approach to reviewing community charter applications.
D. Current Proposal
Upon further reflection, including having considered the public
comments to the May 2007 proposed rule, the NCUA Board has decided to
issue this proposal as a substitute for the May 2007 proposal. As
noted, some provisions of the May 2007 proposal have been brought
forward into the current proposal without change, while others have
been modified or eliminated. NCUA believes the current proposal is a
better method for improving the community charter policies of NCUA's
Chartering Manual.
1. Well Defined Local Communities
NCUA believes it continues to be prudent policy to consider single
political jurisdictions and statistical areas, as those terms are
described more fully below, as WDLCs because they meet reasonable
objective and quantifiable standards. For reasons discussed more fully
below, single political jurisdictions are treated the same in the
current proposal as in the May 2007 proposal. Statistical areas,
however, are treated somewhat differently in the current proposal from
how they were treated in the May 2007 proposal. In the current
proposal, NCUA has added an additional criterion an applicant must meet
to establish that a statistical area with multiple jurisdictions is a
WDLC. Specifically, the 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 FCUA provides that a ``community credit union'' consists of
``persons or organizations within a well-defined local community,
neighborhood, or rural district.'' 12 U.S.C. 1759(b)(3). The FCUA
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 FR 18334, 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 more than six 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. A
single political jurisdiction 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, a single
political jurisdiction 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 single
political jurisdictions are WDLCs where residents have common interests
and/or interact.
ii. Statistical Areas
The Board proposes to establish a statistical definition of WDLC in
cases involving multiple political jurisdictions. In that context, a
geographically certain area will 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
[[Page 68725]]
definition consistent with the mission of credit unions. While single
political jurisdictions 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).
OMB publishes the geographic areas its analysis indicates exhibit
these important criteria. The Board is familiar with and has utilized
these statistics. In the past six years, the agency has approved in
excess of 50 community charters involving MSAs, usually involving a
community based around a dominant core trade area.
The Board believes 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
be considered to have met 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
MicroSAs. 65 FR 82228. 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
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 Metropolitan Statistical
Area. 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
[[Page 68726]]
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).
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 also believes
that the reasonableness of the conclusion is further strengthened when
additional factors establishing the dominance of the core area are
present. These additional factors are also objective and easily
measurable.
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 will not meet the definition of a WDLC. Individual
Metropolitan Divisions within the CBSA will qualify as a WDLC if the
population and employment criteria are met. 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 believes that capping a
multijurisdictional area at 2.5 million or less people in order to
qualify as a WDLC is appropriate. 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 acknowledges 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 proposes 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 will assure that
the core area dominates any other area within the CBSA with respect to
jobs and population. Applicants can find information about an area's
population and number of local jobs, based upon an analysis of where
people who work in an area reside, at the Census' Internet site (http:/
/www.census.gov). Information about the current definitions of CBSAs is
available at OMB's Internet site (http://www.whitehouse.gov/omb).
Community charter applications for part of a CBSA are acceptable
provided they include the dominant core city, county, or equivalent.
Accordingly, the Board proposes to establish a statistical
definition of WDLC in cases involving multiple political jurisdictions.
Specifically, 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.
NCUA believes the presence of these criteria clearly demonstrate
that individuals in those communities have sufficient interaction and/
or common interests. 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
consistent and uniform decisions from regional office to regional
office.
Finally, an applicant that does not wish to serve an entire single
political jurisdiction or statistical area that is defined as a WDLC
may apply for a portion of that area. With respect to single political
jurisdictions, the existing community definition will still apply. With
respect to statistical areas, for reasons discussed throughout, the
definition does not automatically apply. Rather, the applicant must
demonstrate that the portion of the statistical area it wishes to serve
independently satisfies the criteria for establishing a statistical
area is a WDLC that meets the required population and employment
criteria as discussed throughout.
2. Narrative Approach
As mentioned previously, NCUA 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, the NCUA proposes to eliminate from the
community chartering process the narrative approach and all related
aspects of that procedure.
While not every area will qualify as a WDLC, NCUA believes the
consistency of this objective approach will enhance its chartering
policy and greatly ease the burden for any community charter applicant.
To put this in perspective, NCUA analyzed the sixty-one largest
statistical areas in the United States, based on 2007 population
estimates, to determine how many would qualify as WDLCs under the
proposed policy changes. Eleven of those statistical areas contain
metropolitan divisions. Of the sixty-one statistical areas, twenty-
seven would qualify in their entirety. Of the remaining thirty-four
statistical areas that would not qualify as WDLCs as a whole, NCUA
found virtually all of the areas encompass smaller segments that would
include a majority of the statistical area's residents by virtue of:
(1) Having a large single political jurisdiction within the statistical
area; (2) having been previously approved as a WDLC by the NCUA Board;
or (3) containing a metropolitan division that would qualify as a WDLC
on its own.
3. Grandfathered WDLCs
An area previously approved by NCUA as a WDLC, prior to the
effective date of any amendment to the Chartering Manual, in the event
the subject proposed amendments are finalized, will continue to be
considered a WDLC for subsequent applicants who
[[Page 68727]]
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.
4. Rural District
NCUA is proposing a different definition of ``rural district'' from
that in the May 2007 proposal. For the same reasons discussed with
respect to WDLCs, the NCUA Board believes the definition of a rural
district should be based on quantifiable and objective criteria. The
Board continues to believe that a rural district should be less densely
populated and smaller in population than those areas that qualify as a
WDLC.
The NCUA Board proposes to define 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. 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 Census. The Board believes
this definition will help credit unions serve future members in areas
that currently have few financial services options. In addition, the
Board believes there will be minimal overlap between the definitions of
``rural district'' and ``statistical area'' but recognizes that the
definitions of ``rural district'' and ``single political jurisdiction''
could overlap in some cases.
5. Underserved Communities
The FCUA defines an underserved area as a local community,
neighborhood, or rural district that is an ``investment area'' as
defined in Section 103(16) of the Community Development Banking and
Financial Institutions Act of 1994. The Board proposes to amend the
language in the Chartering Manual's underserved communities section
concerning the ``local community, neighborhood, or rural district''
requirement to conform it with the proposed new definitions of WDLC and
rural district by referring the reader to Chapter 2 for the actual text
of the definitions. This change will avoid confusion and eliminate any
need for future changes to the underserved communities section in the
event additional changes are made to the definitions in Chapter 2.
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 FCUA. 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.'' Since the final rule was adopted, a perception has
arisen that this methodology is 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 are geared to 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. Accordingly, the NCUA
Board invites 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.
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 single political
jurisdictions, 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.'' The Board proposes
clarifying NCUA's marketing plan requirement to provide credit unions
with additional guidance on NCUA's expectations. FCUs need to be
realistic in assessing their ability to serve a particular community.
For example, an FCU with $150 million in assets cannot reasonably
expect to be able to serve a community of 1.5 million people. NCUA
believes 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.
These requirements will serve to ensure that if the community
charter is granted, the credit union will be well positioned to safely
serve the entire community. Additionally, 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 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 administrative
actions the region intends to take.
[[Page 68728]]
NCUA recognizes that determining from a marketing plan if an FCU
has the ability to serve a particular WDLC requires some degree of
subjectivity, and NCUA believes its substantial experience enables it
to make that determination. NCUA would prefer, however, to receive
comments from interested parties on whether there are other more
objective ways to measure an FCU's ability to serve a particular WDLC.
7. Timing
NCUA will accept community charter applications based only on
grandfathered WDLCs, as discussed above, and single political
jurisdictions between the issuance of this proposal on December 17,
2009 and the effective date of any final amendments the Board adopts
regarding the Chartering Manual. NCUA will accept all community charter
applications, based on any permitted criteria, on or after that
effective date. Those applications will be considered under the revised
version of NCUA's community chartering policies as amended by this
proposal.
8. 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. The emergency merger statute addresses exigent
circumstances and is intended to serve the public interest and credit
union members by providing for the continuation of credit union service
to members from a financially strong credit union.
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'' nor has NCUA previously issued a formal definition. NCUA
now believes it advisable to adopt an objective standard to aid it in
making the ``in danger of insolvency'' determination. This will provide
certainty and consistency in how NCUA interprets the standard.
NCUA believes 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). Note also that NCUA staff reviewed State
credit union statutes and found that the Illinois Credit Union Act
defines a credit union as ``in danger of insolvency'' if its net worth
to asset ratio falls below two percent (2%).\2\ This is the same as the
critically undercapitalized net worth category under NCUA's PCA
provisions.
---------------------------------------------------------------------------
\2\ 17 Ill. Comp. Stat. Ann. 305/1.1. An alternative definition
of danger of insolvency under the Illinois statute is if the State
supervisory authority is unable to ascertain, upon examination, the
true financial condition of the credit union. Id.
---------------------------------------------------------------------------
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.
E. Regulatory Procedures
Regulatory Flexibility Act
The Regulatory Flexibility Act requires NCUA to prepare an analysis
to describe any significant economic impact a regulation may have on a
substantial number of small credit unions, primarily those under ten
million dollars in assets. The proposed amendments will not have a
significant economic impact on a substantial number of small credit
unions and therefore, a regulatory flexibility analysis is not
required.
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 proposed
amendments will not increase paperwork requirements and a
[[Page 68729]]
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. The proposed rule would not have substantial
direct effects on the States, on the connection 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 the proposed rule does not constitute a policy that has
federalism implications for purposes of the executive order because it
only applies to Federal credit unions.
The Treasury and General Government Appropriations Act, 1999--
Assessment of Federal Regulations and Policies on Families
The NCUA has determined that the proposed rule would not affect
family well-being within the meaning of section 654 of the Treasury and
General Government Appropriations Act of 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 December
17, 2009.
Mary Rupp,
Secretary of the Board.
For the reasons discussed above, NCUA proposes to amend 12 CFR part
701 as follows:
PART 701--ORGANIZATION AND OPERATIONS OF FEDERAL CREDIT UNION
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:
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 http://
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;
Other alternatives are not reasonably available; and
The public interest would best be served by approving
the merger.
* * * * *
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.
* * * * *
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 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 a community
charter can be based--persons who live in, worship in, attend school
in, or work in the community. Businesses and other legal entities
within the community boundaries 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.
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 part thereof, or in the case of a CBSA with Metropolitan
Divisions, the area is a Metropolitan Division or part thereof; and
The area contains a city, county or equivalent with a
majority of all jobs in the CBSA or metropolitan division; and
The city, county or equivalent contains 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.
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
100,000 people.
[[Page 68730]]
The OMB definitions of CBSA and Metropolitan Division may be
found at 65 FR 82238 (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 http://
www.gpoaccess.gov/fr/index.html and on NCUA's Web site at http://
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 -------- (insert effective date of final amendments)
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 administrative 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 MSA must state in the field of
membership the political jurisdiction(s) that comprise the MSA.
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;
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, MSA, 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
Adams County and 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).
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
[[Page 68731]]
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. The glossary to appendix B to part 701 is amended by adding a
definition of ``in danger of insolvency'' to be added in alphabetical
order to read as follows:
* * * * *
In danger of insolvency--In making the determination that a
particular credit union is in danger of insolvency, NCUA will
establish that the credit union falls into one or more of the
following categories:
1. The credit union's net worth is declining at a rate that will
render it insolvent within 24 months. In projecting future net
worth, NCUA may rely on data in addition to Call Report data. The
trend must be supported by at least 12 months of historic data.
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. In
projecting future net worth, NCUA may rely on data in addition to
Call Report data. The trend must be supported by at least 12 months
of historic data.
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. In making its
determination on the prospect of achieving adequate capitalization,
NCUA will assume that, if adverse economic conditions are affecting
the value of the credit union's assets and liabilities, including
property values and loan delinquencies related to unemployment,
these adverse conditions will not further deteriorate.
* * * * *
[FR Doc. E9-30557 Filed 12-28-09; 8:45 am]
BILLING CODE 7535-01-P