[Federal Register Volume 80, Number 237 (Thursday, December 10, 2015)]
[Proposed Rules]
[Pages 76748-76853]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-30069]



[[Page 76747]]

Vol. 80

Thursday,

No. 237

December 10, 2015

Part II





National Credit Union Administration





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12 CFR Part 701





Chartering and Field of Membership Manual; Proposed Rule

  Federal Register / Vol. 80 , No. 237 / Thursday, December 10, 2015 / 
Proposed Rules  

[[Page 76748]]


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NATIONAL CREDIT UNION ADMINISTRATION

12 CFR Part 701

RIN 3133-AE31


Chartering and Field of Membership Manual

AGENCY: National Credit Union Administration (NCUA).

ACTION: Proposed rule with request for comments.

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SUMMARY: The NCUA Board proposes to comprehensively amend its 
chartering and field of membership rules to put them in a more 
efficient framework and to maximize access to federal credit union 
services to the extent permitted by law. The amendments will implement 
changes in policy affecting: The definition of a local community, a 
rural district, and an underserved area; the expansion of multiple 
common bond credit unions and members' proximity to them; the expansion 
of single common bond credit unions based on a trade, industry or 
profession; and the process for applying to charter or expand a federal 
credit union.

DATES: Comments must be received on or before February 8, 2016.

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/proposed_regs/proposed_regs.html. Follow the 
instructions for submitting comments.
     Email: Address to [email protected]. Include ``[Your 
name] Comments on Notice of Proposed Rulemaking Regarding Associational 
Common Bond'' in the email subject line.
     Fax: (703) 518-6319. Use the subject line described above 
for email.
     Mail: Address to Gerard S. Poliquin, Secretary of the 
Board, National Credit Union Administration, 1775 Duke Street, 
Alexandria, Virginia 22314-3428.
     Hand Delivery/Courier: Same as mail address.
    Public Inspection: You may view all public comments on NCUA's Web 
site at http://www.ncua.gov/Legal/Regs/Pages/PropRegs.aspx as 
submitted, except for those we cannot post for technical reasons. NCUA 
will not edit or remove any identifying or contact information from the 
public comments submitted. You may inspect paper copies of comments in 
NCUA's law library at 1775 Duke Street, Alexandria, Virginia 22314, by 
appointment weekdays between 9 a.m. and 3 p.m. To make an appointment, 
call (703) 518-6546 or send an email to [email protected].

FOR FURTHER INFORMATION CONTACT: Matthew Biliouris, Deputy Director, or 
Robert Leonard, Director, Division of Consumer Access, or Rita Woods, 
Director, Division of Consumer Access South, Office of Consumer 
Protection, at the above address or telephone (703) 518-1140; or Senior 
Staff Attorney Steven Widerman or Staff Attorney Marvin Shaw, Office of 
General Counsel, at the above address or telephone (703) 518-6540.

SUPPLEMENTARY INFORMATION: 

I. Background

A. Overview

    NCUA's Chartering and Field of Membership Manual, incorporated as 
appendix B to part 701 of its regulations (``Chartering and FOM 
Manual''),\1\ implements the field of membership (``FOM'') requirements 
established by the Federal Credit Union Act (``the FCU Act'') for 
federal credit unions (``FCUs'').\2\ An FOM consists of those persons 
and entities eligible for membership according to an FCU's type of 
charter.
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    \1\ Appendix B to 12 CFR part 701(``appendix B'').
    \2\ 12 U.S.C. 1759.
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    In adopting the Credit Union Membership Access Act of 1998 
(``CUMAA''), Congress reiterated its longstanding support for credit 
unions, noting their ``specif[ic] mission of meeting the credit and 
savings needs of consumers, especially persons of modest means.'' \3\ 
As amended by CUMAA, the FCU Act provides a choice among three charter 
types: A single group sharing a single occupational or associational 
common bond; \4\ a multiple common bond, with each group having a 
distinct occupational or associational common bond among group members; 
\5\ and a community common bond among persons or organizations within a 
well-defined local community, neighborhood or rural district.\6\
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    \3\ Pub. L. 105-219, Section 2, 112 Stat. 913 (Aug 7, 1998).
    \4\ 12 U.S.C. 1759(b)(1).
    \5\ Id. Section 1759(b)(2)(A).
    \6\ Id. Section 1759(b)(3).
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    Based on NCUA's experience in processing applications for initial 
approval and subsequent expansion of all three types of charters, the 
Board periodically updates and revises the Chartering and FOM Manual to 
ensure adherence to the statutory criteria, limitations and special 
rules that apply to each charter type, to reflect contemporary 
practice, and to enhance the user-friendliness of the Chartering and 
FOM Manual for the benefit of those seeking to charter an FCU, as well 
as for existing credit unions.

B. Why is NCUA Proposing this Rule?

    The proposed rule will modify the Board's policies affecting the 
definition of a local community, a rural district, and an underserved 
area; group members' proximity to multiple common bond FCUs when they 
expand; and expansion of single common bond FCUs that serve a trade, 
industry or profession; and the process for applying to charter or 
expand an FCU. Consistent with its responsibility under CUMAA to 
facilitate access to credit unions and their delivery of services, the 
Board is proposing these policy modifications in order to accomplish 
several objectives. The first is to ease any undue burdens and 
restrictions on an FCU's ability to provide services to consumers who 
are eligible for FCU membership, particularly those of modest means and 
those who may not currently be members of a credit union. The second is 
to enhance the menu of strategic options for FOM expansions. The third 
is to maximize competitive parity between federal and state charters, 
to the extent allowed by law, while respecting the national system of 
dual chartering. The Board invites public comments addressing all 
aspects of the proposed rule.

II. Summary of the Proposed Rule

A. Community Common Bond

    As amended in 1998, the FCU Act limits membership in a community 
credit union to ``[p]ersons or organizations within a well-defined 
local community, neighborhood or rural district.'' \7\ It directs the 
Board to define what constitutes a well-defined local community, 
neighborhood or rural district for purposes of ``making any 
determination'' regarding a community credit union,\8\ and to establish 
applicable criteria for any such determination.\9\ To qualify as a 
well-defined local community or rural district, the Board requires the 
proposed area to have ``specific geographic boundaries,'' such as those 
of ``a city, township, county (single or multiple portions of a county) 
or their political equivalent, school districts or a clearly

[[Page 76749]]

identifiable neighborhood.'' \10\ The boundaries themselves may consist 
of political borders, streets, rivers, railroad tracks, or other static 
geographical feature.\11\ The Board continues to emphasize interaction 
and common interests among residents within those boundaries as 
essential to the viability of a local community.
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    \7\ Id. Section 1759(b).
    \8\ Id. Section 1759(g)(1)(A).
    \9\ Id. Section 1759(g)(1)(B).
    \10\ Appendix B, Ch. 2, Section V.A.2.
    \11\ Appendix B, Ch. 2, Section V.A.5.
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    Since 2010, the Board has provided credit unions the option of two 
uniform, nationally-recognized, objective geographic units that, by 
definition, meet the statutory criteria of a well-defined local 
community, neighborhood or rural district. The first is a ``Single 
Political Jurisdiction . . . or any contiguous portion thereof,'' 
regardless of population.\12\ The second is a single U.S. Census 
Bureau-designated Core Based Statistical Area or one or more 
Metropolitan Divisions within, or a well-defined portion of either one, 
subject in any case to a 2.5 million population limit that applies to 
the Core Based Statistical Area as a whole.\13\ Under either well-
defined local community option, a credit union must be able to serve 
the proposed community or rural district, as demonstrated by its 
business and marketing plans that must accompany an application for 
charter approval, expansion or conversion.\14\
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    \12\ Appendix B, Ch. 2, Section V.A.2.
    \13\ Appendix B, Ch. 2, Section V.A.2.
    \14\ Appendix B, Ch. 2, Section V.A.4.
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    1. Core Based Statistical Area Population Limit. As explained 
above, a Core Based Statistical Area qualifies as a well-defined local 
community only if its population does not exceed 2.5 million. By 
design, this population limit conforms to the population parameter by 
which OMB recognizes metropolitan divisions with a Core Based 
Statistical Area.\15\ Upon further consideration in connection with 
this rule, the Board has decided to retain the 2.5 million population 
limit, but nonetheless invites public comment on whether to adjust the 
limit, by what amount, and for what specific reasons.
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    \15\ https://www.whitehouse.gov/sites/default/files/omb/bulletins/2015/15-01.pdf (at page 62).
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    2. ``Core Area'' Service Requirement. Since 2010, NCUA has required 
that when a credit union applies to serve a community consisting of a 
portion of a Core Based Statistical Area, that portion must include the 
Core Based Statistical Area's ``core area,'' which NCUA defines as the 
most populated county or named municipality in the Core Based 
Statistical Area's title.\16\ The primary purpose of this requirement 
was to acknowledge the core area of a Core Based Statistical Area as 
the typical focal point for common interests and interaction among 
residents. An additional purpose was to extend FCU services to low-
income persons and underserved areas, both typically located primarily 
in the core area of a Core Based Statistical Area. NCUA's review of 
progress under approved FCUs' business and marketing plans over the 
last five years indicates that those credit unions are adequately 
serving low-income persons and underserved areas without regard to 
their location within the community. Accordingly, NCUA proposes to 
repeal the core area requirement as an indicator of service to low-
income persons and underserved areas, in favor of its practice of 
annually reviewing the progress of business and marketing plans for 
three years following charter approval or expansion, and relying on 
those plans to assess those service objectives within an original or an 
expanded community.
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    \16\ 75 FR 36257, 36260 (June 25, 2010).
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    3. Population Limit as Applied to a Well-Defined Portion of a Core 
Based Statistical Area. The Board presently permits a well-defined 
portion of a Core Based Statistical Area to qualify as a well-defined 
local community provided the population of the Core Based Statistical 
Area as a whole does not exceed the 2.5 million population 
limitation,\17\ disregarding whether the portion a credit union seeks 
to serve alone meets that limitation. A review of requests to serve a 
portion of a Core Based Statistical Area that were denied because the 
population of the whole Core Based Statistical Area exceeded 2.5 
million has convinced the Board that this is an unnecessarily broad 
application of the population cap that produces unintended 
consequences.
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    \17\ Appendix B, Ch. 2, Section V.A.2. (``statistical area'' 
definition).
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    To target the 2.5 million population limit strictly to the 
community a credit union seeks to serve, the Board proposes to modify 
its ``statistical area'' definition to specify that ``a Core Based 
Statistical Area, Metropolitan Division, or well-defined portion of 
either one, must itself have a population of 2.5 million or fewer 
people.'' This will ensure that a portion of a Core Based Statistical 
Area, or a Metropolitan Division within, qualifies as a well-defined 
local community when it meets the population limit solely as applied to 
that portion, even if the Core Based Statistical Area as a whole 
exceeds the limit.
    4. ``Combined Statistical Area'' as a Single Well-Defined Local 
Community. As explained above, a Core Based Statistical Area or a 
Metropolitan Division within a Core Based Statistical Area, or a well-
defined portion of either one, qualifies as a well-defined local 
community subject to a population limit.\18\ Acknowledging the 
interdependence among adjacent Core Based Statistical Areas, the Office 
of Management and Budget (``OMB'') has recognized 169 Combined 
Statistical Areas consisting of contiguous Core Based Statistical 
Areas, and Metropolitan and Micropolitan Statistical Areas within, that 
complement one another according to objective measurements of social 
and economic integration among an area's residents.\19\
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    \18\ 75 FR 36257 (June 25, 2010).
    \19\ OMB Bulletin No. 15-01 to Heads of Executive Departments 
and Establishments (July 15, 2015) defines a Combined Statistical 
Area as ``two or more Metropolitan Statistical Areas, a Metropolitan 
Statistical Area and a Micropolitan Statistical Area, two or more 
Micropolitan Statistical Areas, or multiple Metropolitan and 
Micropolitan Statistical Areas that have social and economic ties as 
measured by commuting, but at lower levels than are found among 
counties within Metropolitan and Micropolitan Statistical Areas.'' 
OMB characterizes Core Based Statistical Areas as ``representing 
larger regions that reflect broader social and economic 
interactions, such as wholesaling, commodity distribution, and 
weekend recreation activities, and are likely to be of considerable 
interest to regional authorities and the private sector.'' https://www.whitehouse.gov/sites/default/files/omb/bulletins/2015/15-01.pdf
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    OMB's approach in designating Combined Statistical Areas is 
consistent with that of the Board in relying on residents' interactions 
and common interests to define a local community. Accordingly, the 
Board proposes to expand the existing single Core Based Statistical 
Area definition of a well-defined local community to include Combined 
Statistical Areas as designated by OMB, subject to the 2.5 million 
population limit. Additionally, in evaluating expansion requests, NCUA 
will continue its practice of reviewing each FCU's business and 
marketing plans to determine its capability and success in serving its 
original and previously expanded community.
    5. Addition of an Adjacent Area to a Well-Defined Local Community. 
Despite the convenience, certainty and staff efficiency of using a 
Single Political Jurisdiction, a Core Based Statistical Area or a 
Combined Statistical Area to form a well-defined local community or 
rural district, areas adjacent to the perimeter of these objective 
geographic units may lack a credit union presence and/or lack 
sufficient access to financial services, even though residents on both 
sides of the perimeter may routinely interact or share common interests 
with

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each other. To enable residents of those adjacent areas to access 
credit union services, the Board proposes to permit the addition of 
such an area to a community consisting of a Single Political 
Jurisdiction, Core Based Statistical Area, Combined Statistical Area, 
or rural district, upon a showing by subjective evidence that residents 
on both sides of the perimeter interact or share common interests.
    The expanded community would be subject to the proposed population 
limits for community charters (2.5 million) and rural district charters 
(1 million).\20\ The more expansive the adjacent area, theoretically 
even surrounding the original community's entire perimeter, the more 
challenging and burdensome it may be for a credit union to, first, 
subjectively demonstrate a sufficient totality of indicia of 
interaction or common interests among residents of the expanded 
community,\21\ and then to establish through the credit union's 
business and marketing plans its ability and commitment to serve the 
entire expanded community.
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    \20\ See Rural District Definition discussion later in this same 
section.
    \21\ The proposed rule incorporates guidance identifying 
compelling indicia of common interests and interaction that would be 
relevant when a credit union chooses to submit a narrative to NCUA 
to demonstrate that the residents of the expanded community meet the 
requirements of a well-defined local community.
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    The Board recognizes that credit unions seeking to add bordering 
areas to their existing community or rural district charters 
historically have already established a proven track record of serving 
an existing community or rural district and should not be subject to 
the same requirements as those for a credit union seeking to convert to 
a community or rural district charter. Therefore, the Board proposes to 
require a federal credit union seeking to add a bordering area to 
follow a streamlined set of business plan requirements contained in 
this rule. The Board seeks comment on the appropriateness of the 
proposed set of streamlined requirements, and if any specific items 
should be added or removed from the proposed criteria. The Board also 
seeks comment on the existing comprehensive business and marketing plan 
requirements. Finally, the Board is considering whether to limit the 
availability of this streamlined approach to a federal credit union 
seeking a certain maximum percentage increase in its field of 
membership, and is interested in receiving public comment on this 
aspect of the proposal.
    6. Individual Congressional District as a Well-Defined Local 
Community. Since 1999, the Board has maintained that neither a 
Congressional district nor a whole state qualifies as a well-defined 
local community, despite recognizing that both are well-defined.\22\ 
These restrictions were never imposed by statute; rather, the Board 
disallowed whole states and Congressional districts solely as a matter 
of policy.\23\ When imposing these restrictions, the Board recognized 
that--
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    \22\ 63 FR 72013, 72037 (December 30, 1998); Appendix B, Ch. 2, 
Section V.A.2.
    \23\ 63 FR at 72037. See also 75 FR at 36258 (affirming that 
entire state is not acceptable as WDLC)

    in general, a large population in a small geographic area or a 
small population in a large geographic area, may meet community 
chartering requirements. Conversely, . . . a large population in a 
large geographic area will not normally meet community chartering 
requirements. In so doing, however, the Board has not summarily 
dismissed or prejudged any potential application. While an area with 
a large population may require additional documentation, it still 
may meet the definition of a local community.\24\
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    \24\ 63 FR at 72012.

    A significant change in circumstances has prompted the Board to 
reconsider this policy as it applies to Congressional districts--namely 
that, NCUA has, since 1999, approved 21 Single Political Jurisdictions 
that each have a population in excess of 1 million, while the average 
population of the United States' 435 Congressional districts is 
710,767.\25\
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    \25\ http://www.census.gov/fastfacts.
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    The most populous of the 435 districts is the ``at large'' district 
serving the state of Montana, with a population of 1,023,579; Rhode 
Island has the smallest average district size at 523,028.\26\ As 
measured by population, it is appropriate to recognize each individual 
Congressional district, as well as the District of Columbia and each 
U.S. territory represented by a non-voting delegate,\27\ as local when 
compared to Single Political Jurisdictions as large in population as 
Los Angeles County, California (9.6 million), approved by the Board in 
2003, and Harris County, Texas (3.45 million), approved by the Board in 
2007.
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    \26\ Id. Seven states presently are comprised of a single 
Congressional district, effectively giving each a state-wide FOM: 
Alaska, Delaware, Montana, North Dakota, South Dakota, Vermont and 
Wyoming.
    \27\ American Samoa, Guam, Northern Mariana Islands, Puerto 
Rico, and the U.S. Virgin Islands.
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    Among residents of Single Political Jurisdictions comprised of 
towns, cities and counties, the focal point of common interests and 
interaction tends be local services, resources and facilities (e.g., 
taxes, schools, police and fire protection). The proposal acknowledges 
that Congressional districts, structured for purposes of federal 
representation, reflect interaction and common interests among each 
district's constituents based on issues and matters decided at the 
federal level that affect them locally (e.g., economic, agricultural, 
and environmental).
    Based on this rationale, the Board proposes to recognize each 
individual Congressional district as a Single Political Jurisdiction, 
thus qualifying it as a well-defined local community without regard to 
population.\28\
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    \28\ Appendix B, Ch. 2, Section V.A.1.
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    As in the case of any community charter application, a credit union 
that applies to serve a Congressional district must submit a business 
and marketing plan demonstrating its ability and commitment to serve 
the entire community. The larger the Congressional district, the more 
challenging and burdensome it may be for an applicant to satisfy this 
requirement.
    If, as a result of redistricting, the boundaries of an individual 
Congressional district were to be redrawn, the FOM consisting of the 
original Congressional district would no longer be available to be 
served by any other FCU. Only an FCU that was approved to serve an FOM 
comprised of an individual Congressional district would be 
grandfathered to continue serving that area.

B. Rural District Definition

    The Board has, since 2013, imposed two requirements for a proposed 
area to qualify as a well-defined ``Rural District.'' The first is that 
the area's total population cannot exceed the greater of either 250,000 
people or 3 percent of the population of the state in which the 
majority of the proposed Rural District's residents would be 
located.\29\ The second is that either at least 50 percent of the 
proposed Rural District's population must reside in census blocks or 
other geographic units the U.S. Census Bureau (``U.S. Census'') 
designates as ``rural,'' or the proposed Rural District's population 
density cannot exceed 100 persons per square mile.\30\ Independently of 
these well-defined local community requirements, a credit union must be 
able to serve the proposed Rural District, as demonstrated by its 
business and marketing plans that must accompany

[[Page 76751]]

an application for charter approval, expansion or conversion.\31\
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    \29\ Appendix B, Ch. 2, Section V.A.2.
    \30\ Id.
    \31\ Appendix B, Ch. 2, Section V.A.4.
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    1. Population Limits. The 250,000 persons/3 percent population 
limits were based on the view that a Rural District should have a 
relatively small, widely disbursed population. However, a compelling 
countervailing factor continues to weigh against this view: To make the 
area attractive as a strategic option, a Rural District must have a 
population sufficient to enable credit unions to achieve a sufficient 
level of operating efficiencies and scale to deliver products and 
services. Balancing these opposing population considerations, NCUA 
proposes to modify the Rural District definition to increase the 
population limit to 1 million persons. Because the increased population 
limit would exceed 3 percent of a state's population in all states but 
one (California), making that alternative redundant, the proposed rule 
omits it. The Board invites public comment on whether to adjust the 
proposed 1 million population limit, by what amount, and for what 
specific reasons.
    2. Multi-State Expansion Limit. In 1998, the Board conceded that 
``While an area with a large population may require additional 
documentation, it still may meet the definition of a local community. 
Similarly, multiple counties, particularly in rural areas, may qualify 
for a community charter.'' \32\ To achieve consistency with U.S. Census 
recognition of expansive rural areas, the proposed rule modifies the 
option for an area to qualify as a Rural District either because it is 
among the ``rural counties'' identified by the Consumer Financial 
Protection Bureau (``CFPB''),\33\ or because the area has a sparse 
population density of no more than 100 people per square mile. These 
criteria truly reflect an area's rural character regardless of its 
physical size, as shown by the eight states in which the U.S. Census 
identifies more than 40 percent of the state population as ``rural.'' 
\34\
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    \32\ 63 FR at 72012.
    \33\ See CFPB's ``Rural or underserved counties list'' available 
at: http://www.consumerfinance.gov/guidance/#ruralunderserved.
    \34\ https://www.census.gov/geo/reference/ua/urban-rural-2010.html (List of Population, Land Area and Percent Urban and Rural 
in 2010 and Changes from 2000 to 2010).
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    As revised, the Rural District definition--a 1 million population 
limit, and either a sparse population density or ``rural'' 
designation--would continue to permit a Rural District to extend beyond 
a single state's boundaries. To prevent the overexpansion of Rural 
Districts, however, the Board proposes to prohibit a single well-
defined Rural District from exceeding the boundaries of the states that 
are immediately contiguous to the state in which the FCU serving the 
Rural District is headquartered (i.e., not to exceed the outer 
perimeter of the layer of states immediately bordering the headquarters 
state).

C. Underserved Areas

    The FCU Act authorizes the NCUA Board to allow multiple common bond 
credit unions to serve members residing in an ``underserved area,'' 
provided the FCU establishes and maintains a facility in the area.\35\ 
For an area to be ``underserved,'' it must qualify: (1) As a well-
defined local community, neighborhood or rural district; \36\ (2) as an 
``investment area'' under the Community Development Banking and 
Financial Institutions Act (``CDFI Act''); \37\ and (3) as 
``underserved'' by other depository institutions (as defined [by the 
CDFI Act]) ``based on data of the Board and the Federal banking 
agencies.'' \38\ Other than to limit the sources of data and to define 
``depository institutions,'' the FCU Act prescribes no specific test or 
criteria to assess ``underservice.'' Within this broad authority, the 
Board seeks to refine the data used in its concentration of facilities 
ratio, first introduced in 2008,\39\ to determine whether a proposed 
area is underserved by other depository institutions, as well as to 
propose for comment alternative methodologies and metrics as options 
for making that determination.
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    \35\ 12 U.S.C. 1759(c)(2).
    \36\ Id.
    \37\ Id. Section 4702(16).
    \38\ Id. Section 1759(c)(2)(A) citing id. Section 461(b)(1)(A). 
By definition, a ``depository institution'' is insured and includes 
credit unions. Id. Section 461(b)(1)(A)(iv).
    \39\ 73 FR 73392 (Dec. 2, 2008). Using census tracts as the unit 
of measure, the concentration of facilities ratio compares the 
concentration of depository institution facilities among the 
population within the non-``distressed'' portions of the proposed 
area against the concentration of such facilities among the 
population of the area as a whole. 73 FR at 73396. Ch.3, Section 
III.B.3.of appendix B. An area qualifies as underserved by other 
depository institutions when the concentration of facilities ratio 
within its non-``distressed'' census tracts exceeds the 
concentration of facilities ratio within the census tracts of the 
area as a whole.
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    1. Exclusion of Non-Depository Institutions and Non-Community 
Credit Unions from Concentration of Facilities Ratio. It has been 
NCUA's practice to calculate an area's concentration of facilities 
ratio on behalf of a credit union seeking approval to serve it as an 
underserved area. To assess the presence of banks and savings 
associations within geographic units that do not already qualify as 
``distressed'' under the CDFI Act, NCUA has relied upon data compiled 
by the Federal Deposit Insurance Corporation (``FDIC'') in its Summary 
of Deposits Survey,\40\ and on NCUA data to assess the presence of 
credit unions. The Board proposes to exclude two data components from 
the ratio, on a contingent basis, to prevent the concentration of 
facilities ratio from being diluted or distorted by over-inclusive 
data, as well as to ensure compliance with the letter and the spirit of 
the ``depository institutions'' definition the FCU Act references.\41\
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    \40\ FDIC's ``Summary of Deposits Survey,'' e.g., https://www.fdic.gov/news/news/financial/2015/fil15024.pdf.
    \41\ 12 U.S.C. 461(b)(1)(A).
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    The first component is NCUA data reflecting the presence of non-
community credit unions, such as multiple common bond credit unions--
other than those already serving the proposed area as an underserved 
area--because they would be unable to serve the general public of a 
underserved area (i.e., unable to serve anyone not within its select 
groups). The second component is FDIC data reflecting the presence of 
non-depository institutions, such as trust companies, which do not 
accept deposits from the general public. Excluding data reflecting the 
presence of institutions that would not be capable of serving a 
proposed area, either by definition or in fact, will preclude the 
unwarranted denial of an application to serve an underserved area.
    It would be impracticable and an inefficient use of resources for 
NCUA to segregate bank and credit union data on a nationwide scale to 
exclude non-depository bank and non-community credit union data. 
However, in the event an initial concentration of facilities ratio 
calculation fails to identify a proposed area as underserved by other 
depository institutions, the proposed rule would require NCUA to then 
exclude the non-depository bank and non-community credit union data and 
recalculate the ratio. This will ensure the integrity of the result, as 
well as maximize the identification of areas that would benefit from 
the introduction of credit union service to compensate for the lack of 
service by other depository institutions. This approach also will 
conserve NCUA resources that otherwise would be consumed in routinely 
excluding this data without regard to whether an initial concentration 
of facilities ratio calculation without those exclusions would yield a 
positive result.

[[Page 76752]]

    2. Alternatives to Identify Areas ``Underserved by Other Depository 
Institutions.'' While the concentration of facilities ratio has 
generally proven to be an effective measure of underservice by other 
depository institutions, it has some inherent limitations: It accounts 
for the physical presence of depository institutions in a given area, 
but it does not necessarily evaluate the benefit or quality of services 
these institutions deliver.\42\ Accordingly, the Board proposes two 
alternatives to the concentration of facilities ratio that may reflect 
underservice by other depository institutions more comprehensively. The 
first would be the designation of ``underserved counties'' by the 
CFPB,\43\ which has rulemaking authority over Federal banking agencies' 
collection of Home Mortgage Disclosure Act (``HMDA'') data used to make 
those designations.\44\ The second would be a metric of a credit 
union's own choosing that it would submit as evidence of underservice 
in a proposed area, provided the metric is based on ``data of the Board 
and the Federal banking agencies.''\45\
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    \42\ The benefit and quality of services depository institutions 
deliver is addressed by the ``distress'' criterion requiring the 
area to have ``significant unmet need for loans and financial 
services.'' 12 U.S.C. 4702(16)(A)(ii).
    \43\ Although CFPB's annual ``Rural or underserved counties 
list'' does not segregate ``rural'' and ``underserved'' counties, 
NCUA will use the data collected by CFPB to produce and make 
available a list that identifies ``underserved areas'' exclusively.
    \44\ 12 U.S.C. 1813(z). Financial institutions, including 
national banks, Federal savings associations, state member banks, 
and FCUs report mortgage related data to their respective Federal 
regulator -OCC, the Fed, FDIC and NCUA.
    \45\ E.g., FDIC ``Summary of Deposits Survey.''
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    The Board invites commenters to identify other methodologies and 
Federal banking agency data that would be useful in identifying areas 
``underserved by other depository institutions'' in an objective 
manner. Examples include data from Community Reinvestment Act 
examination reports prepared by the FDIC, Office of the Comptroller of 
the Currency (``OCC'') or the Board of Governors of the Federal Reserve 
System (``the Fed''),\46\ and HMDA data collected by these agencies. 
The Board encourages commenters to suggest why and how any specific 
methodology and supporting data recommended for consideration would 
establish an objective basis for analysis of underservice by other 
depository institutions.
---------------------------------------------------------------------------

    \46\ E.g., http://www.ffiec.gov/cra/default.htm.
---------------------------------------------------------------------------

D. Multiple Common Bond

    As amended in 1998, the FCU Act restored the Board's multiple 
common bond policy, permitting a multiple common bond credit union to 
serve a combination of distinct, definable occupational and/or 
associational groups, each having its own common bond among group 
members.\47\
---------------------------------------------------------------------------

    \47\ 63 FR 71998, December 30, 1998; 12 U.S.C. 1759(b)(2)(A). 
See NCUA v. First National Bank & Trust Co., 522 U.S. 479 (1988).
---------------------------------------------------------------------------

    1. Credit Union's ``Reasonable Proximity'' through Members' Online 
Access to Services. The FCU Act authorizes multiple common bond credit 
unions to expand through the addition of select groups having 
dissimilar common bonds, provided such a group does not exceed 3,000 
members.\48\ To add a group that exceeds that limit, the group must 
meet other criteria the FCU Act prescribes to establish that it ``could 
not feasibly or reasonably establish a new single common bond credit 
union.'' \49\ Regardless of group size, the FCU Act further requires 
the Board, in deciding whether to approve a multiple common bond 
expansion, ``to encourage the formation of separately chartered credit 
unions . . . whenever practicable and consistent with reasonable 
standards for the safe and sound operation of the credit union,'' based 
on approval criteria the FCU Act prescribes.\50\
---------------------------------------------------------------------------

    \48\ Id. Section 1759(d)(1).
    \49\ Id. Section 1759(d)(2)(A).
    \50\ Id. Section 1759(f)(1)(A).
---------------------------------------------------------------------------

    When formation of a stand-alone single common bond credit union 
either is not practicable, or would be inconsistent with reasonable 
standards of safety and soundness, the FCU Act requires ``inclusion of 
the group in the [FOM] of a credit union that is within reasonable 
proximity to the location of the group whenever practicable and 
consistent with reasonable standards for the safe and sound operation 
of the credit union.'' \51\ The Chartering and FOM Manual implements 
both the stand-alone feasibility criteria and the multiple common bond 
expansion approval criteria.
---------------------------------------------------------------------------

    \51\ Id. Section 1759(f)(1)(B) (emphasis added).
---------------------------------------------------------------------------

    In 1998, the Board acknowledged that ``reasonable proximity'' is an 
essential factor in determining whether a select group can be added to 
a multiple common bond credit union.\52\ However, the Board did not 
require an added group's location to be within reasonable proximity of 
the credit union's main office, but rather, within the service area of 
a ``service facility'' of the credit union. As currently defined, a 
``service facility'' includes a credit union branch, a shared branch, a 
mobile branch that visits the same location on a weekly basis, and a 
credit union-owned electronic facility.\53\ To qualify as a service 
facility, a group's members must be able to deposit funds, apply for a 
loan or obtain funds on approved loans.\54\
---------------------------------------------------------------------------

    \52\ 63 FR 71998, 72002 (December 30, 1998).
    \53\ Appendix B, Ch.2, Section IV.A.1 and appendix 1 (glossary).
    \54\ Appendix B, Ch.2, Section IV.A.1.
---------------------------------------------------------------------------

    To recognize the role of advancing technologies in enabling 
reasonable proximity between a credit union and the groups it serves, 
the Board proposes to revise the definition of a ``service facility'' 
to extend it to members of occupational select groups, and members of 
pre-approved associational groups,\55\ who have access to their credit 
union's products and services through an online internet channel such 
as a transactional Web site. This proposed change would apply solely to 
meet the ``reasonable proximity'' requirement that applies to a 
multiple common bond credit union and its select occupational and 
associational groups; it would not apply to meet the requirement that a 
credit union serving an underserved area ``must establish and maintain 
an office or facility in [the underserved area].'' \56\ To provide the 
same functionality currently required for a service facility, the 
online internet channel must be capable of accepting shares for those 
members' accounts and loan applications from them, or disbursing loan 
proceeds to them. The Board emphasizes that this proposed change would 
allow access to online financial services only by already existing 
members of multiple common bond credit unions; it would not permit an 
individual to qualify remotely for membership in a community credit 
union based on electronic access to it from outside its well-defined 
local community.
---------------------------------------------------------------------------

    \55\ Appendix B, Ch. 2, Section III.A.1.B.
    \56\ 12 U.S.C. 1759(c)(1)(B).
---------------------------------------------------------------------------

    To support its proposal to incorporate online financial services in 
the definition of ``service facility'' through online internet channels 
via access to laptop computers, personal computers and mobile devices, 
the Board has reviewed data from FCUs regarding consumer needs and 
preferences. By all measures, the use of online financial services has 
increased dramatically in the past 15 years. Federally insured credit 
unions' Call Report data indicates that the proportion of members using 
transactional Web sites has steadily increased from 27 percent of 
members in the fourth quarter of 2006 (23.2 million) to 45 percent in 
the second quarter of 2015 (40.5 million)--an increase of 17.3 million 
users.

[[Page 76753]]

    Among FCUs, only 22 percent offered home banking via an internet 
Web site in 2000. This share increased to 68 percent in the fourth 
quarter of 2011 (4,846 out of 7,094), and 75 percent by the second 
quarter of 2015 (4,612 out of 6,159). There has been similarly 
significant growth in the use of smart phones and tablets to conduct 
mobile banking transactions. With such technology non-existent as late 
as 2008, only 6 percent of FCUs offered mobile banking in 2009. This 
share increased to 16 percent in 2011, and 47 percent by the second 
quarter of 2015.
    Similarly, data collected by the Boston Consulting Group (``BCG'') 
indicates actual consumer use of online delivery channels has increased 
significantly.\57\ Specifically, online consumer contacts with banks 
nearly doubled from 2004 to 2012. Mobile and internet banking increased 
from 5 percent of customer contacts in 2004 to about 48 percent by 
2012. In contrast, the share of contacts conducted in branches fell 
from 75 percent to 30 percent during this period. The BCG study noted 
that mobile and internet banking transaction volume advanced not only 
due to the increase in the number of overall contacts, but because 
banking transactions accounted for a larger share of total activity. 
The BCG study emphasized that to compete effectively in the financial 
sector, financial institutions need to establish business plans that 
make ``interactions across multiple channels simple--not disjointed or 
constrained by internal organizational boundaries in a way that leads 
customers to dead ends. Channels should support each other, not 
compete.'' \58\ In addition, the BCG study predicted that internet 
contacts as a percentage of all contacts would increase to about 66 
percent by 2020.
---------------------------------------------------------------------------

    \57\ Maguire, Andy, et. al., Distribution 2020: The Next Big 
Journey for Retail Banking (March 2013): https://www.bcgperspectives.com/content/articles/financial_institutions_sales_channels_distribution_2020/?chapter=2.
    \58\ American Bankers Association Press Release: More Consumers 
Turning to Mobile Banking (August 11, 2015).
---------------------------------------------------------------------------

    The dramatic increase in FCUs offering mobile banking service is 
consistent with the use of internet and mobile banking services by 
consumers generally. An annual study sponsored by the American Bankers 
Association, and conducted by Ipsos Public Affairs for 2015, surveyed 
1,000 adults about their banking preferences among the following 
choices: Internet banking (laptop or personal computer), mobile devices 
(cell phone, Blackberry, PDA, tablet), brick and mortar branches, ATMs, 
telephone, and mail. A primary question was, ``Which method do you use 
most often to manage your bank accounts?'' The table below indicates 
that 41 percent of customers preferred internet or mobile banking. In 
contrast, only 21 percent preferred branch banking. These preferences 
were similar in 2013 and in 2014. The study sponsor further stated that 
``This is the sixth year in a row [2008-2014] that customers named the 
Internet as their favorite way of conducting their banking business.'' 
\59\
---------------------------------------------------------------------------

    \59\ Id. at 2.

------------------------------------------------------------------------
             Type of banking                   2014            2013
------------------------------------------------------------------------
Online channels (laptop or PC)..........             31%             39%
Branches................................             21%             18%
ATMs....................................             14%             11%
Mobile (cell phone, Blackberry, PDA,                 10%              8%
 IPad)..................................
Telephone...............................              7%              7%
Mail....................................              6%              7%
Don't Know/Not sure.....................             11%             10%
------------------------------------------------------------------------

    Similarly, government-sponsored studies indicate dramatic increases 
in online banking in the past few years. Since 2011, the Fed has 
conducted an annual survey that focuses on one channel of online 
banking: Smart phone technology for mobile banking.\60\ That survey 
illustrates the increased reliance of smart phone technology for mobile 
banking. The March 2015 Report of a December 2014 survey stated, 
``Thirty nine percent of all mobile phone owners with a bank account 
have used mobile banking in the 12 months prior to the survey, up from 
33 percent in 2013 and 29 percent in 2012.'' Further, ``Fifty two 
percent of smartphone owners with a bank account used mobile banking in 
the past 12 months, up from 51 percent in 2013.'' The Federal Reserve 
survey further found that another 11 percent of mobile phone users 
think that they will use smart phones for online banking within 12 
months.\61\
---------------------------------------------------------------------------

    \60\ Federal Reserve Consumers and Mobile Financial Services 
(March 2015).
    \61\ Id. Executive Summary at 4.
---------------------------------------------------------------------------

    The Federal Reserve Bank of Atlanta studied the use of mobile 
banking by banks and credit unions to determine the level of and type 
of mobile financial services offered by financial institutions.\62\ Of 
189 respondents in Georgia, Alabama, Florida, and parts of Mississippi, 
Louisiana, and Tennessee, which included banks and credit unions of all 
asset sizes, only six (3 percent) did not currently offer or, plan to 
offer mobile banking services. Further, the study noted, ``There was 
very little difference between the bank and CU responses.'' The study 
also confirmed a significant trend toward offering mobile banking, 
given that 23 percent of the respondents began offering mobile banking 
within the past year and 15 percent were planning to offer such 
services within the next two years.
---------------------------------------------------------------------------

    \62\ Mobile Banking and Payments Survey of Financial 
Institutions of the Sixth District, Lott, David (March 2015).
---------------------------------------------------------------------------

    The strong consumer preference for online financial services, as 
well as for integration of online banking into financial institutions' 
overall business and marketing plans indicates the need to amend the 
Chartering and FOM Manual to facilitate current credit union members' 
access to such online services. Accordingly, to put multiple common 
bond credit unions and members of the groups they serve within 
reasonable proximity of each other, as required by law, as well as to 
put them in parity with their depository institution competitors, the 
Board is proposing to amend the definition of ``service facility'' to 
include online financial services, including computer-based and mobile 
phone channels meeting certain criteria for access.
    In addition to the proposal to include a transactional Web site in 
the definition of ``service facility,'' the Board is considering 
modifying the definition of ``service area'' to include one or more 
discreet political jurisdictions such as a county or city. While the 
Board historically has discouraged using mileage and distance factors 
exclusively to define reasonable proximity,\63\ it acknowledges that 
there may be an appropriate level of certainty in also defining 
reasonable proximity to

[[Page 76754]]

encompass a city or county jurisdiction. The Board invites comments on 
options to modify the definition of ``service area.''
---------------------------------------------------------------------------

    \63\ 63 FR 71998, 72003 (December 30, 1998).
---------------------------------------------------------------------------

    2. Inclusion of Select Employee Group Contractors in a Multiple 
Common Bond. The Board presently includes within the definition of a 
single occupational common bond the persons who work regularly for an 
entity that is under contract to the sponsor of the select employee 
group (``SEG'') listed in its charter, provided the contractor has a 
``strong dependency relationship'' with that sponsor.\64\ This 
definition relies on the presence of a ``strong dependency 
relationship'' between the SEG sponsor and its contractor to establish 
the ``common bond of occupation'' the FCU Act requires for a group to 
be included in either a single or a multiple common bond credit 
union.\65\ There being no distinction between a single and a multiple 
common bond credit union for purposes of recognizing the occupational 
affinity between a SEG sponsor's own employees and those of each 
sponsor's contractors, the Board proposes to extend to multiple 
occupational common bond credit unions the ability to add persons who 
work regularly for an entity that is under contract to any of the 
multiple SEG sponsors listed in its charter, provided the contractor 
has a ``strong dependency relationship'' with the sponsor in each case.
---------------------------------------------------------------------------

    \64\ Appendix B, Ch. 2, Section II.A.1.
    \65\ 12 U.S.C. 1759(b)(1) & (2).
---------------------------------------------------------------------------

    3. Inclusion of Office/Industrial Park Tenants in a Multiple Common 
Bond. In the past, NCUA has recognized industrial parks as a special 
type of community charter.\66\ As an alternative to extend credit union 
service to persons who work in an office or industrial park, the Board 
now proposes to also permit a multiple common bond credit union to 
include as a SEG the employees of a park's tenants (e.g., retail 
tenants of a shopping mall, business tenants of an office building or 
complex). The group listed in the charter would be the office/
industrial park itself; it would not be necessary to individually list 
each tenant as a group sponsor. Inclusion of such office/industrial 
park groups within a multiple common bond credit union would be subject 
to two conditions: Each tenant within the group must have fewer than 
3,000 employees working at a facility within the park, and only those 
employees who work regularly at the park during their employer's 
tenancy would be eligible for FCU membership. New tenants to the 
industrial park would be eligible for membership subject to the above 
conditions.
---------------------------------------------------------------------------

    \66\ Appendix B, Ch. 2, Section V.A.6 (special community 
charters).
---------------------------------------------------------------------------

    The option of including a tenants' SEG within a multiple common 
bond would allow those FCUs to more efficiently offer services to 
employees of small businesses, avoiding an extensive outlay of 
resources to obtain letters from each group requesting credit union 
service. Instead, a multiple common bond credit union could serve 
employees of an office/industrial park's tenants by obtaining a letter 
from an authorized representative of the park itself, such as its 
leasing agent.
    4. Streamlined Determination of Stand-Alone Feasibility of Groups 
Greater than 3,000. Based on NCUA's experience in assessing the stand-
alone feasibility of groups in excess of 3,000 members, and data 
regarding the failure rate of credit unions during a 12-year 
period,\67\ a trend has emerged: 80 percent of credit union failures 
occurred in credit unions with fewer than 5,000 members. In view of 
this trend, the Board has decided to modify NCUA's process for 
assessing the stand-alone feasibility of groups that seek to be added 
to the FOM of an existing multiple common bond credit union, rather 
than forming the group's own single common bond credit union. 
Accordingly, the Board proposes to reorganize and streamline the 
application process for multiple common bond expansions according a 
group's size.
---------------------------------------------------------------------------

    \67\ Credit union failures according to asset size and 
membership as reflected in final Call Reports for 2003Q1-2015Q2.
---------------------------------------------------------------------------

    Groups of fewer than 3,000 members will be subject to the existing 
application process, consisting of the following: A written request 
using the Application for Field of Membership (NCUA 4015 EZ), a letter 
from the group requesting credit union service and indicating the 
desire to be added to the FCU's field of membership; the number of 
persons included in the group to be added; and the group's proximity to 
the credit union's nearest service facility. Applicants do not need to 
support these groups' lack of ability to form their own credit union.
    Since the statute presumes a group of 3,000 or more members can 
form a credit union, there is a higher burden of proof to establish 
that such a group cannot form its own credit union. When a group has 
between 3,000 and 5,000 members and displays evidence of a lack of 
available subsidies, disinterest among the group's members, and an 
overall lack of sufficient resources, the Board has historically 
determined that the group could not feasibly or reasonably establish a 
new single common bond credit union. In such cases the Board will 
accept a written statement indicating these conditions exist as 
sufficient documentation the group cannot form its own credit union. 
Consistent with current policy on incidental overlaps, the Board will 
no longer require an overlap analysis of a group between 3,000 and 
5,000 members, given that groups in this size range rarely have been 
able to form a stand-alone credit union. Groups with more than 5,000 
members will be subject to the existing standard application process, 
requiring a group to fully describe its inability to establish a new 
single common bond credit union.
    However, the Board is particularly interested in comments on 
whether to consider a larger number than 5,000 for this threshold. 
While 80 percent of failures occurred in credit unions with fewer than 
5,000 actual members, the number of potential members of those credit 
unions was significantly larger. Therefore, if 5,000 actual credit 
union members were deemed to be the minimum number needed to charter a 
viable new credit union, the number of potential members needed to 
reach 5,000 actual members would be larger.
    For example, if the average penetration rate of actual members to 
potential members at the smallest multiple-group credit unions is 50 
percent, a group of 10,000 potential members may be needed to reach 
5,000 actual members. The Board welcomes comments on how many actual 
members are needed to charter a viable new credit union, and how many 
potential members would be needed in order to reach that minimum number 
of actual members.
    There are three benefits to the proposed three-tiered process for 
assessing a group's stand-alone feasibility. First, it conforms to the 
stand-alone feasibility criteria the FCU Act prescribes for groups in 
excess of 3,000, and the approval criteria it prescribes for the 
addition of a group, regardless of its size, to an existing multiple 
common bond credit union.\68\ Second, it will minimize the resource 
burden on individual groups and credit unions in compiling information 
and documentation to support an application to add a group, as well as 
on the NCUA staff in assessing the application. Finally, it will allow 
NCUA to more effectively allocate its resources by focusing its 
scrutiny on individual groups based on the record of survival of newly 
chartered credit unions having

[[Page 76755]]

more than 5,000 members when formed. This would enhance the agency's 
ability to conduct an appropriate level of due diligence in its 
reviews.
---------------------------------------------------------------------------

    \68\ Id. Section 1759 (d)(2) & (f)(1).
---------------------------------------------------------------------------

E. Other Persons Eligible for Credit Union Membership

    NCUA has historically recognized a variety of persons who, by 
virtue of their relationship to a common bond group, have been entitled 
to credit union membership eligibility. Principal among these persons 
are members of the immediate family or household of a primary member of 
a credit union members (i.e., spouse, child, sibling, parent, 
grandparent, grandchild, including by step or adoptive 
relationship).\69\ Other such affinity groups include spouses of 
deceased credit union members, current credit union employees, 
pensioners and annuitants who have retired from credit union 
employment, and persons who perform volunteer work for a credit 
union.\70\
---------------------------------------------------------------------------

    \69\ Appendix B, Ch.2, Sections II.H., IV.H., and appendix 1 
(glossary definition of ``affinity'').
    \70\ Appendix B, Ch.2, Sections II.H., IV.H.
---------------------------------------------------------------------------

    Active duty and discharged military personnel and their families 
share a similar affinity, typically maintaining a close relationship 
with their active duty branch of service, largely through Armed Forces 
associations, publications and continued access to military bases, such 
as Veterans Administration facilities, base commissaries, post 
exchanges, and morale, welfare and recreation sponsored programs. To 
honor the contributions of those serving in the United States Armed 
Forces, and to give them the benefit of access to credit union service 
throughout their lives following active duty, the Board proposes to 
include within a credit union's common bond the honorably discharged 
veterans of any branch of the United States Armed Forces listed in its 
charter, continuing their eligibility for credit union membership 
beyond active duty.

F. Trade, Industry or Profession (``TIP'') as a Single Common Bond

    A TIP is a single occupational common bond based on employment at 
any number of corporations or other legal entities that, while not 
under common ownership, still have a common bond by reason of producing 
similar products, providing similar services, sharing the same 
profession or trade, or participating in the same industry.\71\ To 
establish ``one group that has a common bond of occupation,'' as the 
FCU Act prescribes, a TIP-based FOM must reflect a narrow commonality 
of interests among those working within a specific trade, industry, or 
profession, and there must be a close nexus among the entities within 
the group.\72\ The commonality of interest and close nexus requirements 
preclude a TIP from including third-party vendors and other suppliers 
and contractors. As an example, an automobile TIP may include all 
workers manufacturing automobiles but may not include the steel 
suppliers or other component suppliers.
---------------------------------------------------------------------------

    \71\ 68 FR 18334, 18336 (April 15, 2003); Appendix B, Ch. 2, 
Section IIA.2.
    \72\ Id.
---------------------------------------------------------------------------

    Inclusion of ``Strong Dependency'' Vendors and Suppliers in TIP 
Definition. The Board already recognizes a single occupational common 
bond between a SEG sponsor's own employees and those of its 
contractors, provided there is a ``strong dependency relationship'' 
between the sponsor and the contractor. Similarly, NCUA proposes to 
clarify its definition of a TIP to include employees of types of 
entities that have a strong dependency relationship on, and whose 
employees work directly with employees of, other entities within the 
same industry. An example would be an FCU that serves employees of 
companies within the airline industry that have a strong dependency 
relationship with airlines or airports, and whose employees work 
directly with providers of air freight transportation, courier 
services, air passenger services, in-flight food services, airport 
security, baggage handling, and commercial janitorial, maintenance and 
repair services. The premise of a strong relationship between these 
providers and their airport and airline customers is the likelihood of 
a significant economic impact, if not equally between them, if one were 
unable to continue in its operations without doing business with the 
other. As expanded, the TIP definition would give credit unions the 
opportunity to demonstrate that an entity is ``strongly dependent'' on 
the others within a TIP, and shares a narrow commonality of interest 
with them, as necessary to be part of a TIP-based single occupational 
common bond.

G. Technical Updates

    Apart from introducing substantive revisions to NCUA's FOM rules 
and policies, the proposed rule will update the Chartering and FOM 
Manual to enhance its accuracy and user-friendliness for the benefit of 
those seeking to charter a credit union, as well as for existing credit 
unions. To that end, the proposed rule substitutes certain references 
to regional office and regional director chartering responsibilities 
with references to the Office of Consumer Protection as the primary 
office for chartering matters within NCUA and, to address previous 
comments, substitutes the Board Secretary for the Office of Consumer 
Protection in reference to appeals of chartering decisions.\73\ 
Finally, the proposed rule corrects statutory and regulatory citations 
and cross-references, as well as typos; updates the appendices to the 
Chartering and FOM Manual to reflect current agency practices; and 
updates references to NCUA offices and industry trade associations.
---------------------------------------------------------------------------

    \73\ 87 FR 25924, 25929 (May 6, 2015).
---------------------------------------------------------------------------

III. 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 entities.\74\ For purposes of this 
analysis, NCUA considers small credit unions to be those having under 
$50 million in assets.\75\ Although this rule is anticipated to 
economically benefit FCUs that choose to expand their FOMs, NCUA 
certifies that it will not have a significant economic impact on small 
credit unions.
---------------------------------------------------------------------------

    \74\ 5 U.S.C. 603(a).
    \75\ Effective November 23, 2015, the asset ceiling for small 
credit unions will increase to $100 million. 80 FR 57512 (Sept. 24, 
2015).
---------------------------------------------------------------------------

Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (PRA) applies to collections of 
information through which an agency creates a paperwork burden on 
regulated entities or the public, or modifies an existing burden.\76\ 
For purposes of the PRA, a paperwork burden may take the form of either 
a reporting or a recordkeeping requirement, both referred to as 
information collections. The Office of Management and Budget (OMB) 
previously approved the current information collection requirements for 
the Chartering and Field of Membership Manual and assigned them control 
number 3133-0015.
---------------------------------------------------------------------------

    \76\ 44 U.S.C. 3507(d); 5 CFR part 1320.
---------------------------------------------------------------------------

    The proposed rule creates new strategic options for FCUs, while 
requiring essentially the same information that the existing rule 
required to apply for and be granted a charter expansion or conversion, 
with two exceptions. It introduces a new form within an appendix to the

[[Page 76756]]

Chartering and Field of Membership Manual to condense the application 
process for adding certain groups to a multiple common bond FOM. This 
new form does not add any additional burden to FCUs.
    Regarding a community common bond, the proposed rule permits an FCU 
to add an area adjacent to the perimeter of its existing community 
consisting of a Single Political Jurisdiction, Core Based Statistical 
Area, Combined Statistical Area or rural district, upon a showing by 
subjective evidence that residents on both sides of the perimeter 
interact or share common interests. For that purpose, the rule provides 
guidance in identifying compelling indicia of interaction or common 
interests that would be relevant in drafting a narrative summarizing 
the indicia that demonstrate that the residents of the expanded 
community meet the requirements of a well-defined local community.
    NCUA has determined that the procedure for an FCU to assemble such 
subjective evidence of interaction or common interests, and to draft 
and submit a narrative summarizing the evidence to support its 
application to expand, would create a new information collection 
requirement. As required, NCUA is applying to OMB for approval to amend 
the current information collection to account for the new procedure.
    Approximately 1,090 FCUs have a community charter. While there is 
no reasonable way to measure how many FCUs will use this particular 
option, it would be available to any community FCU, regardless of asset 
size. NCUA estimates that, on average, it would take an FCU's staff 
approximately 24 hours to collect the evidence of interaction and 
common interests and to draft a narrative to support its application to 
expand. Accordingly, NCUA estimates the aggregate information 
collection burden on FCUs that seek to add an area adjacent to the 
perimeter of an existing community consisting of a Single Political 
Jurisdiction, Core Based Statistical Area, Combined Statistical Area or 
rural district would be 24 hours times 1,090 FCUs for a total of 26,160 
hours. NCUA is proposing to amend the current information collection 
control number 3133-0015 to account for these additional burden hours.
    Organizations and individuals wishing to submit comments on this 
information collection requirement should direct them to the Office of 
Information and Regulatory Affairs, OMB, Attn: Shagufta Ahmed, Room 
10226, New Executive Office Building, Washington, DC 20503, with a copy 
to the Secretary of the Board, National Credit Union Administration, 
1775 Duke Street, Alexandria, Virginia 22314-3428.
    NCUA will consider comments by the public on this proposed 
collection of information in:
     Evaluating whether the proposed collection of information 
is necessary for the proper performance of the functions of the NCUA, 
including whether the information will have a practical use;
     Evaluating the accuracy of NCUA's estimate of the burden 
of the proposed collection of information, including the validity of 
the methodology and assumptions used;
     Enhancing the quality, usefulness, and clarity of the 
information to be collected; and
     Minimizing the burden of collection of information on 
those who are to respond, including through the use of appropriate 
automated, electronic, mechanical, or other technological collection 
techniques or other forms of information technology (e.g., permitting 
electronic submission of responses).

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. Primarily because this rule applies to FCUs 
exclusively, it will not have a substantial direct effect 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 this rule does not 
constitute a policy that has federalism implications for purposes of 
the executive order.

Assessment of Federal Regulations and Policies on Families

    NCUA has determined that this proposed rule will not affect family 
well-being within the meaning of Section 654 of the Treasury and 
General Government Appropriations Act, 1999.\77\
---------------------------------------------------------------------------

    \77\ Pub. L. 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 November 
19, 2015.
Gerard S. Poliquin,
Secretary of the Board.
    For the reasons stated above, NCUA proposes to amend 12 CFR part 
701, appendix B, as follows:

PART 701--ORGANIZATION AND OPERATION OF FEDERAL CREDIT UNIONS

0
1. The authority for part 701 continues to read as follows:

    Authority:  12 U.S.C. 1752(5), 1755, 1756, 1757, 1758, 1759, 
1761a, 1761b, 1766, 1767, 1782, 1784, 1786, 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 42 U.S.C. 4311-4312.

0
2. Appendix B to part 701 is revised to read as follows:

Appendix B to Part 701--Chartering and Field of Membership Manual

Chapter 1--Federal Credit Union Chartering

I--Goals of NCUA Chartering Policy

    The National Credit Union Administration's (NCUA) chartering and 
field of membership policies are directed toward achieving the 
following goals:
     To encourage the formation of credit unions;
     To uphold the provisions of the Federal Credit Union 
Act;
     To promote thrift and credit extension;
     To promote credit union safety and soundness; and
     To make quality credit union service available to all 
eligible persons.
    NCUA may grant a charter to single occupational/associational 
groups, multiple groups, or communities if:
     The occupational, associational, or multiple groups 
possess an appropriate common bond or the community represents a 
well-defined local community, neighborhood, or rural district;
     The subscribers are of good character and are fit to 
represent the proposed credit union; and
     The establishment of the credit union is economically 
advisable.
    Generally, these are the primary criteria that NCUA will 
consider. In unusual circumstances, however, NCUA may examine other 
factors, such as other federal law or public policy, in deciding if 
a charter should be approved. Unless otherwise noted, the policies 
outlined in this manual apply only to federal credit unions.

II--Types of Charters

    The Federal Credit Union Act recognizes three types of federal 
credit union charters--single common bond (occupational and 
associational), multiple common bond (more than one group each 
having a common bond of occupation or association), and community.

[[Page 76757]]

    The requirements that must be met to charter a federal credit 
union are described in Chapter 2 of this manual. Special rules for 
credit unions serving low-income groups are described in Chapter 3 
of this manual.
    If a federal credit union charter is granted, Section 5 of the 
charter will describe the credit union's field of membership, which 
defines those persons and entities eligible for membership. 
Generally, federal credit unions are only able to grant loans and 
provide services to persons within the field of membership who have 
become members of the credit union.

III--Subscribers

    Federal credit unions are generally organized by persons who 
volunteer their time and resources and are responsible for 
determining the interest, commitment, and economic advisability of 
forming a federal credit union. The organization of a successful 
federal credit union takes considerable planning and dedication.
    Persons interested in organizing a federal credit union should 
contact one of the credit union trade associations or the NCUA 
regional office serving the state in which the credit union will be 
organized. Lists of NCUA offices and credit union trade associations 
are shown in the appendices. NCUA will provide information to groups 
interested in pursuing a federal charter and will assist them in 
contacting an organizer.
    While anyone may organize a credit union, a person with training 
and experience in chartering new federal credit unions is generally 
the most effective organizer. However, extensive involvement by the 
group desiring credit union service is essential.
    The functions of the organizer are to provide direction, 
guidance, and advice on the chartering process. The organizer also 
provides the group with information about a credit union's functions 
and purpose as well as technical assistance in preparing and 
submitting the charter application. Close communication and 
cooperation between the organizer and the proposed members are 
critical to the chartering process.
    The Federal Credit Union Act requires that seven or more natural 
persons--the ``subscribers''--present to NCUA for approval a sworn 
organization certificate stating at a minimum:
     The name of the proposed federal credit union;
     The location of the proposed federal credit union and 
the territory in which it will operate;
     The names and addresses of the subscribers to the 
certificate and the number of shares subscribed by each;
     The initial par value of the shares;
     The detailed proposed field of membership; and
     The fact that the certificate is made to enable such 
persons to avail themselves of the advantages of the Federal Credit 
Union Act.
    False statements on any of the required documentation filed in 
obtaining a federal credit union charter may be grounds for federal 
criminal prosecution.

IV--Economic Advisability

IV.A--General

    Before chartering a federal credit union, NCUA must be satisfied 
that the institution will be viable and that it will provide needed 
services to its members. Economic advisability, which is a 
determination that a potential charter will have a reasonable 
opportunity to succeed, is essential in order to qualify for a 
credit union charter.
    NCUA will conduct an independent on-site investigation of each 
charter application to ensure that the proposed credit union can be 
successful. In general, the success of any credit union depends on: 
(a) The character and fitness of management; (b) the depth of the 
members' support; and (c) present and projected market conditions.

IV.B--Proposed Management's Character and Fitness

    The Federal Credit Union Act requires NCUA to ensure that the 
subscribers are of good ``general character and fitness.'' 
Prospective officials and employees will be the subject of credit 
and background investigations. The investigation report must 
demonstrate each applicant's ability to effectively handle financial 
matters. Employees and officials should also be competent, 
experienced, honest and of good character. Factors that may lead to 
disapproval of a prospective official or employee include criminal 
convictions, indictments, and acts of fraud and dishonesty. Further, 
factors such as serious or unresolved past due credit obligations 
and bankruptcies disclosed during credit checks may disqualify an 
individual.
    NCUA also needs reasonable assurance that the management team 
will have the requisite skills--particularly in leadership and 
accounting--and the commitment to dedicate the time and effort 
needed to make the proposed federal credit union a success.
    Section 701.14 of NCUA's Rules and Regulations sets forth the 
procedures for NCUA approval of officials of newly chartered credit 
unions. If the application of a prospective official or employee to 
serve is not acceptable to the Office of Consumer Protection 
Director, the group can propose an alternate to act in that 
individual's place. If the charter applicant feels it is essential 
that the disqualified individual be retained, the individual may 
appeal the Office of Consumer Protection Director's decision to the 
NCUA Board. If an appeal is pursued, action on the application may 
be delayed. If the appeal is denied by the NCUA Board, an acceptable 
new applicant must be provided before the charter can be approved.

IV.C--Member Support

    Economic advisability is a major factor in determining whether 
the credit union will be chartered. An important consideration is 
the degree of support from the field of membership. The charter 
applicant must be able to demonstrate that membership support is 
sufficient to ensure viability.
    NCUA has not set a minimum field of membership size for 
chartering a federal credit union. Consequently, groups of any size 
may apply for a credit union charter and be approved if they 
demonstrate economic advisability. However, it is important to note 
that often the size of the group is indicative of the potential for 
success. For that reason, a charter application with fewer than 
3,000 primary potential members (e.g., employees of a corporation or 
members of an association) may not be economically advisable. 
Therefore, a charter applicant with a proposed field of membership 
of fewer than 3,000 primary potential members may have to provide 
more support than an applicant with a larger field of membership. 
For example, a small occupational or associational group may be 
required to demonstrate a commitment for long-term support from the 
sponsor.

IV.D--Present and Future Market Conditions--Business Plan

    The ability to provide effective service to members, compete in 
the marketplace, and to adapt to changing market conditions are key 
to the survival of any enterprise. Before NCUA will charter a credit 
union, a business plan based on realistic and supportable 
projections and assumptions must be submitted.
    The business plan should contain, at a minimum, the following 
elements:
     Mission statement;
     Analysis of market conditions, including if applicable, 
geographic, demographic, employment, income, housing, and other 
economic data;
     Evidence of member support;
     Goals for shares, loans, and for number of members;
     Financial services needed/desired;
     Financial services to be provided to members of all 
segments within the field of membership;
     How/when services are to be implemented;
     Organizational/management plan addressing qualification 
and planned training of officials/employees;
     Continuity plan for directors, committee members and 
management staff;
     Operating facilities, to include office space/equipment 
and supplies, safeguarding of assets, insurance coverage, etc.;
     Type of record-keeping and data processing system;
     Detailed semiannual pro forma financial statements 
(balance sheet, income and expense projections) for 1st and 2nd 
year, including assumptions--e.g., loan and dividend rates;
     Plans for operating independently;
     Written policies (shares, lending, investments, funds 
management, capital accumulation, dividends, collections, etc.);
     Source of funds to pay expenses during initial months 
of operation, including any subsidies, assistance, etc., and terms 
or conditions of such resources; and
     Evidence of sponsor commitment (or other source of 
support) if subsidies are critical to success of the federal credit 
union. Evidence may be in the form of letters, contracts, financial 
statements from the sponsor, and any other such document on which 
the proposed federal credit union can substantiate its projections.
    While the business plan may be prepared with outside assistance, 
the subscribers and

[[Page 76758]]

proposed officials must understand and support the submitted 
business plan.

V--Steps in Organizing a Federal Credit Union

V.A--Getting Started

    Following the guidance contained throughout this policy, the 
organizers should submit wording for the proposed field of 
membership (the persons, organizations and other legal entities the 
credit union will serve) to NCUA early in the application process 
for written preliminary approval. The proposed field of membership 
must meet all common bond or community requirements.
    Once the field of membership has been given preliminary 
approval, and the organizer is satisfied the application has merit, 
the organizer should conduct an organizational meeting to elect 
seven to ten persons to serve as subscribers. The subscribers should 
locate willing individuals capable of serving on the board of 
directors, credit committee, supervisory committee, and as chief 
operating officer/manager of the proposed credit union.
    Subsequent organizational meetings may be held to discuss the 
progress of the charter investigation, to announce the proposed 
slate of officials, and to respond to any questions posed at these 
meetings.
    If NCUA approves the charter application, the subscribers, as 
their final duty, will elect the board of directors of the proposed 
federal credit union. The new board of directors will then appoint 
the supervisory committee.

V.B--Charter Application Documentation

V.B.1--General

    As discussed previously in this chapter, the organizer of a 
federal credit union charter must, at a minimum, provide evidence 
that:
     The group(s) possess an appropriate common bond or the 
geographical area to be served is a well-defined local community, 
neighborhood, or rural district;
     The subscribers, prospective officials, and employees 
are of good character and fitness; and
     The establishment of the credit union is economically 
advisable.
    As part of the application process, the organizer must submit 
the following forms, which are available in appendix 4 of this 
manual:
     Federal Credit Union Investigation Report, NCUA 4001;
     Organization Certificate, NCUA 4008;
     Report of Official and Agreement To Serve, NCUA 4012;
     Application and Agreements for Insurance of Accounts, 
NCUA 9500; and
     Certification of Resolutions, NCUA 9501.
    Each of these forms is described in more detail in the following 
sections.

V.B.2--Federal Credit Union Investigation Report, NCUA 4001

    The application for a new federal credit union will be submitted 
on NCUA 4001. State-chartered credit unions applying for conversion 
to a federal charter will use NCUA 4000. (See Chapter 4 for a full 
discussion.) The organizer is required to certify the information 
and recommend approval or disapproval, based on the investigation of 
the request.

V.B.3--Organization Certificate, NCUA 4008

    This document, which must be completed by the subscribers, 
includes the seven criteria established by the Federal Credit Union 
Act. NCUA staff assigned to the case will assist in the proper 
completion of this document.

V.B.4--Report of Official and Agreement To Serve, NCUA 4012

    This form documents general background information of each 
official and employee of the proposed federal credit union. Each 
official and employee must complete and sign this form. The 
organizer must review each of the NCUA 4012s for elements that would 
prevent the prospective official or employee from serving. Further, 
such factors as serious, unresolved past due credit obligations and 
bankruptcies disclosed during credit checks may disqualify an 
individual.

V.B.5--Application and Agreements for Insurance of Accounts, NCUA 9500

    This document contains the agreements with which federal credit 
unions must comply in order to obtain National Credit Union Share 
Insurance Fund (NCUSIF) coverage of member accounts. The document 
must be completed and signed by both the chief executive officer and 
chief financial officer. A federal credit union must qualify for 
federal share insurance.

V.B.6--Certification of Resolutions, NCUA 9501

    This document certifies that the board of directors of the 
proposed federal credit union has resolved to apply for NCUSIF 
insurance of member accounts and has authorized the chief executive 
officer and recording officer to execute the Application and 
Agreements for Insurance of Accounts. Both the chief executive 
officer and recording officer of the proposed federal credit union 
must sign this form.

VI--Name Selection

    It is the responsibility of the federal credit union organizers 
or officials of an existing credit union to ensure that the proposed 
federal credit union name or federal credit union name change does 
not constitute an infringement on the name of any corporation in its 
trade area. This responsibility also includes researching any 
service marks or trademarks used by any other corporation (including 
credit unions) in its trade area. NCUA will ensure, to the extent 
possible, that the credit union's name:
     Is not already being officially used by another federal 
credit union;
     Will not be confused with NCUA or another federal or 
state agency, or with another credit union; and
     Does not include misleading or inappropriate language.
    The last three words in the name of every credit union chartered 
by NCUA must be ``Federal Credit Union.''
    The word ``community,'' while not required, can only be included 
in the name of federal credit unions that have been granted a 
community charter.

VII--NCUA Review

VII.A--General

    Once NCUA receives a complete charter application package, an 
acknowledgment of receipt will be sent to the organizer. At some 
point during the review process, a staff member will be assigned to 
perform an on-site contact with the proposed officials and others 
having an interest in the proposed federal credit union.
    NCUA staff will review the application package and verify its 
accuracy and reasonableness. A staff member will inquire into the 
financial management experience and the suitability and commitment 
of the proposed officials and employees, and will make an assessment 
of economic advisability. The staff member will also provide 
guidance to the subscribers in the proper completion of the 
Organization Certificate, NCUA 4008.
    Credit and background investigations may be conducted 
concurrently by NCUA with other work being performed by the 
organizer and subscribers to reduce the likelihood of delays in the 
chartering process.
    The staff member will analyze the prospective credit union's 
business plan for realistic projections, attainable goals, adequate 
service to all segments of the field of membership, sufficient 
start-up capital, and time commitment by the proposed officials and 
employees. Any concerns will be reviewed with the organizer and 
discussed with the prospective credit union's officials. Additional 
on-site contacts by NCUA staff may be necessary. The organizer and 
subscribers will be expected to take the steps necessary to resolve 
any issues or concerns. Such resolution efforts may delay processing 
the application.
    NCUA staff will then make a recommendation to the Office of 
Consumer Protection Director regarding the charter application. The 
recommendation may include specific provisions to be included in a 
Letter of Understanding and Agreement. In most cases, NCUA will 
require the prospective officials to adhere to certain operational 
guidelines. Generally, the agreement is for a limited term of two to 
four years. A sample Letter of Understanding and Agreement is found 
in appendix 2 of this manual.

VII.B--Office of Consumer Protection Director Approval

    Once approved, the board of directors of the newly formed 
federal credit union will receive a signed charter and standard 
bylaws from the Office of Consumer Protection Director. 
Additionally, the officials will be advised of the name of the 
examiner assigned responsibility for supervising and examining the 
credit union.

VII.C--Office of Consumer Protection Director Disapproval

    When the Office of Consumer Protection Director disapproves any 
charter application, in whole or in part, the organizer will be 
informed in writing of the specific reasons for the disapproval. 
Where applicable, the Office of Consumer Protection Director will 
provide information concerning options or suggestions that the 
applicant could consider

[[Page 76759]]

for gaining approval or otherwise acquiring credit union service. 
The letter of denial will include the procedures for appealing the 
decision.

VII.D--Appeal of Office of Consumer Protection Director Decision

    If the Office of Consumer Protection Director denies a charter 
application, in whole or in part, that decision may be appealed to 
the NCUA Board. An appeal must be sent to the NCUA Board Secretary 
within 60 days of the date of denial and must address the specific 
reasons for denial. The appeal must be clearly identified as such 
and address the specific reason(s) the prospective group disagrees 
with the denial. A copy of the appeal must be sent to the Office of 
Consumer Protection Director. NCUA central office staff will make an 
independent review of the facts and present the appeal with a 
recommendation to the NCUA Board.
    Before appealing, the prospective group may, within 30 days of 
the denial, provide supplemental information to the Office of 
Consumer Protection Director for reconsideration. A reconsideration 
will contain new and material evidence addressing the reasons for 
the initial denial. The Office of Consumer Protection Director will 
have 30 days from the date of the receipt of the request for 
reconsideration to make a final decision. If the request is again 
denied, the applicant may proceed with the appeal process within 60 
days of the date of the last denial. A second request for 
reconsideration will be treated as an appeal to the NCUA Board.

VII.E--Commencement of Operations

    Assistance in commencing operations is generally available 
through the various credit union trade organizations listed in 
appendix 5 of this manual.
    All new federal credit unions are also encouraged to establish a 
mentor relationship with a knowledgeable, experienced credit union 
individual or an existing, well-operated credit union. The mentor 
should provide guidance and assistance to the new credit union 
through attendance at meetings and general oversight. Upon request, 
NCUA will provide assistance in finding a qualified mentor.

VIII--Future Supervision

    Each federal credit union will be examined regularly by NCUA to 
determine that it remains in compliance with applicable laws and 
regulations and to determine that it does not pose undue risk to the 
NCUSIF. The examiner will contact the credit union officials shortly 
after approval of the charter in order to arrange for the initial 
examination (usually within the first six months of operation).
    The examiner will be responsible for monitoring the progress of 
the credit union and providing the necessary advice and guidance to 
ensure it is in compliance with applicable laws and regulations. The 
examiner will also monitor compliance with the terms of any required 
Letter of Understanding and Agreement. Typically, the examiner will 
require the credit union to submit copies of monthly board minutes 
and financial statements.
    The Federal Credit Union Act requires all newly chartered credit 
unions, up to two years after the charter anniversary date, to 
obtain NCUA approval prior to appointment of any new board member, 
credit or supervisory committee member, or senior executive officer. 
Section 701.14 of the NCUA Rules and Regulations sets forth the 
notice and application requirements. If NCUA issues a Notice of 
Disapproval, the newly chartered credit union is prohibited from 
making the change.
    NCUA may disapprove an individual serving as a director, 
committee member or senior executive officer if it finds that the 
competence, experience, character, or integrity of the individual 
indicates it would not be in the best interests of the members of 
the credit union or of the public to permit the individual to be 
employed by or associated with the credit union. If a Notice of 
Disapproval is issued, the credit union may appeal the decision to 
the NCUA Board.

IX--Corporate Federal Credit Unions

    A corporate federal credit union is one that is operated 
primarily for the purpose of serving other credit unions. Corporate 
federal credit unions operate under and are administered by the NCUA 
Office of National Examinations and Supervision.

X--Groups Seeking Credit Union Service

    NCUA will attempt to assist any group in chartering a credit 
union or joining an existing credit union. If the group is not 
eligible for federal credit union service, NCUA will refer the group 
to the appropriate state supervisory authority where different 
requirements may apply.

XI--Field of Membership Designations

    NCUA will designate a credit union based on the following 
criteria:
    Single Occupational: If a credit union serves a single 
occupational sponsor, such as ABC Corporation, it will be designated 
as an occupational credit union. A single occupational common bond 
credit union may also serve a trade, industry, or profession (TIP), 
such as all teachers.
    Single Associational: If a credit union serves a single 
associational sponsor, such as the Knights of Columbus, it will be 
designated as an associational credit union.
    Multiple Common Bond: If a credit union serves more than one 
group, each of which has a common bond of occupation and/or 
association, it will be designated as a multiple common bond credit 
union.
    Community: All community credit unions will be designated as 
such, followed by a description of their geographic boundaries, 
including but not limited to city or county boundaries, roadways, 
rivers, transportation lines.
    Credit unions desiring to confirm or submit an application to 
change their designations should contact the Office of Consumer 
Protection.

XII--Foreign Branching

    Federal credit unions are permitted to serve foreign nationals 
within their fields of membership wherever they reside provided they 
have the ability, resources, and management expertise to serve such 
persons. Before a credit union opens a branch outside the United 
States, it must submit an application to do so and have prior 
written approval of the regional director. A federal credit union 
may establish a service facility on a United States military 
installation or United States embassy without prior NCUA approval.

Chapter 2--Field of Membership Requirements for Federal Credit Unions

I--Introduction

I.A.1--General

    As set forth in Chapter 1, the Federal Credit Union Act provides 
for three types of federal credit union charters--single common bond 
(occupational or associational), multiple common bond (multiple 
groups), and community. Section 109 (12 U.S.C. 1759) of the Federal 
Credit Union Act sets forth the membership criteria for each of 
these three types of credit unions.
    The field of membership, which is specified in Section 5 of the 
charter, defines those persons and entities eligible for membership. 
A single common bond federal credit union consists of one group 
having a common bond of occupation or association. A multiple common 
bond federal credit union consists of more than one group, each of 
which has a common bond of occupation or association. A community 
federal credit union consists of persons or organizations within a 
well-defined local community, neighborhood, or rural district.
    Once chartered, a federal credit union can amend its field of 
membership; however, the same common bond or community requirements 
for chartering the credit union must be satisfied. Since there are 
differences in the three types of charters, special rules, which are 
fully discussed in the following sections of this chapter, may apply 
to each.

I.A.2--Special Low-Income Rules

    Generally, federal credit unions can only grant loans and 
provide services to persons who have joined the credit union. The 
Federal Credit Union Act states that one of the purposes of federal 
credit unions is ``to serve the productive and provident credit 
needs of individuals of modest means.'' Although field of membership 
requirements are applicable, special rules set forth in Chapter 3 of 
this manual may apply to low-income designated credit unions and 
those credit unions assisting low-income groups or to a federal 
credit union that adds an underserved community to its field of 
membership.

II--Occupational Common Bond

II.A.1--General

    A single occupational common bond federal credit union may 
include in its field of membership all persons and entities who 
share that common bond. NCUA permits a person's membership 
eligibility in a single occupational common bond group to be 
established in five ways:
     Employment (or a long-term contractual relationship 
equivalent to employment) in a single corporation or other legal 
entity makes that person part of a single occupational common bond;

[[Page 76760]]

     Employment in a corporation or other legal entity with 
a controlling ownership interest (which shall not be less than 10 
percent) in or by another legal entity makes that person part of a 
single occupational common bond;
     Employment in a corporation or other legal entity which 
is related to another legal entity (such as a company under contract 
and possessing a strong dependency relationship with another 
company) makes that person part of a single occupational common 
bond;
     Employment or attendance at a school makes that person 
part of a single occupational common bond (see Chapter 2, Section 
III.A.1 of this manual); or
     Employment in the same Trade, Industry, or Profession 
(TIP) (see Chapter 2, Section II.A.2 of this manual).
    A geographic limitation is not a requirement for a single 
occupational common bond. However, for purposes of describing the 
field of membership, the geographic areas being served may be 
included in the charter. For example:
     Employees, officials, and persons who work regularly 
under contract in Miami, Florida for ABC Corporation and 
subsidiaries;
     Employees of ABC Corporation who are paid from * * *;
     Employees of ABC Corporation who are supervised from * 
* *;
     Employees of ABC Corporation who are headquartered in * 
* *; and/or
     Employees of ABC Corporation who work in the United 
States.
    The corporation or other legal entity (i.e., the employer) may 
also be included in the common bond--e.g., ``ABC Corporation.'' The 
corporation or legal entity will be defined in the last clause in 
Section 5 of the credit union's charter.
    A charter applicant must provide documentation to establish that 
the single occupational common bond requirement has been met.
    Some examples of valid single occupational common bonds are:
     Employees of the Hunt Manufacturing Company who work in 
West Chester, Pennsylvania. (common bond--same employer with 
geographic definition);
     Employees of the Buffalo Manufacturing Company who work 
in the United States. (common bond--same employer with geographic 
definition);
     Employees, elected and appointed officials of municipal 
government in Parma, Ohio. (common bond--same employer with 
geographic definition);
     Employees of Johnson Soap Company and its majority 
owned subsidiary, Johnson Toothpaste Company, who work in, are paid 
from, are supervised from, or are headquartered in Augusta and 
Portland, Maine. (common bond--parent and subsidiary company with 
geographic definition);
     Employees of MMLLJS contractor who work regularly at 
the U.S. Naval Shipyard in Bremerton, Washington. (common bond--
employees of contractors with geographic definition);
     Employees, doctors, medical staff, technicians, medical 
and nursing students who work in or are paid from the Newport Beach 
Medical Center, Newport Beach, California. (single corporation with 
geographic definition);
     Employees of JLS, Incorporated and MJM, Incorporated 
working for the LKM Joint Venture Company in Catalina Island, 
California. (common bond--same employer--ongoing dependent 
relationship);
     Employees of and students attending Georgetown 
University. (common bond--same occupation);
     Employees of all the schools supervised by the Timbrook 
Board of Education in Timbrook, Georgia. (common bond--same 
employer); or
     All licensed nurses in Fairfax County, Virginia. 
(occupational common bond TIP).
    In contrast, some examples of insufficiently defined single 
occupational common bonds are:
     Employees of manufacturing firms in Seattle, 
Washington. (no defined occupational sponsor; overly broad TIP);
     Persons employed or working in Chicago, Illinois. (no 
occupational common bond).

II.A.2--Trade, Industry, or Profession

    A common bond based on employment in a trade, industry, or 
profession can include employment at any number of corporations or 
other legal entities that--while not under common ownership--have a 
common bond by virtue of producing similar products, providing 
similar services, or participating in the same type of business.
    While proposed or existing single common bond credit unions have 
some latitude in defining a trade, industry, or profession 
occupational common bond, it cannot be defined so broadly as to 
include groups in fields which are not closely related. For example, 
the manufacturing industry, energy industry, communications 
industry, retail industry, or entertainment industry would not 
qualify as a TIP because each industry lacks the necessary 
commonality. However, textile workers, realtors, nurses, teachers, 
police officers, or U.S. military personnel are closely related and 
each would qualify as a TIP.
    The common bond relationship must be one that demonstrates a 
narrow commonality of interests within a specific trade, industry, 
or profession. If a credit union wants to serve a physician TIP, it 
can serve all physicians, but that does not mean it can also serve 
all clerical staff in the physicians' offices. However, if the TIP 
is based on the health care industry, then clerical staff would be 
able to be served by the credit union because they work in the same 
industry and have the same commonality of interests.
    If a credit union wants to include the airline services 
industry, it can serve airline and airport personnel but not 
passengers. Clients or customers of the TIP are not eligible for 
credit union membership (e.g., patients in hospitals). Any company 
that is involved in more than one industry cannot be included in an 
industry TIP (e.g., a company that makes tobacco products, food 
products, and electronics). However, employees of these companies 
may be eligible for membership in a variety of trade/profession 
occupational common bond TIPs.
    Although a TIP must be narrowly defined, and cannot include 
third-party vendors and other suppliers, it may include, on a case 
by case basis with NCUA approval, employees of types of entities 
that have a strong dependency relationship and work directly with 
other types of entities within the industry. As one example, an FCU 
may serve employees of companies within the Airline Transportation 
Industry that have a strong dependency relationship with airlines or 
airports, without the limitation that these employees work at an 
airport. This is provided they work directly with the following: Air 
transportation of freight, air courier services; air passenger 
services; airport baggage handling; airport security; commercial 
airport janitorial services; maintenance, servicing, and repair 
services; and on board airline food services. The employees of those 
entities have a narrow commonality of interests, share the single 
occupational common bond, and can be included within the Air 
Transportation Industry field of membership.
    In general, except for credit unions serving a national field of 
membership or operating in multiple states, a geographic limitation 
is required for a TIP credit union. The geographic limitation will 
be part of the credit union's charter and generally correspond to 
its current or planned operational area. More than one federal 
credit union may serve the same trade, industry, or profession, even 
if both credit unions are in the same geographic location.
    This type of occupational common bond is only available to 
single common bond credit unions. A TIP cannot be added to a 
multiple common bond or community field of membership.
    To obtain a TIP designation, the proposed or existing credit 
union must submit a request to the Office of Consumer Protection 
Director. New charter applicants must follow the documentation 
requirements in Chapter 1 of this manual. New charter applicants and 
existing credit unions must submit a business plan on how the credit 
union will serve the group with the request to serve the TIP. The 
business plan also must address how the credit union will verify the 
TIP. Examples of such verification include state licenses, 
professional licenses, organizational memberships, pay statements, 
union membership, or employer certification. The Office of Consumer 
Protection Director must approve this type of field of membership 
before a credit union can serve a TIP. Credit unions converting to a 
TIP can retain members of record but cannot add new members from its 
previous group or groups, unless it is part of the TIP.
    Section II.B of this manual, on Occupational Common Bond 
Amendments, does not apply to a TIP common bond. Removing or 
changing a geographical limitation will be processed as a 
housekeeping amendment. If safety and soundness concerns are 
present, the Office of Consumer Protection Director may require 
additional information before the request can be processed.
    Section II.H, on Other Persons Eligible for Credit Union 
Membership, applies to TIP based credit unions except for the 
corporate

[[Page 76761]]

account provision which only applies to industry based TIPs. Credit 
unions with industry based TIPs may include corporations as members 
because they have the same commonality of interests as all employees 
in the industry. For example, an airline service TIP (industry) can 
serve an airline carrier (corporate account); however, a nurses TIP 
(profession) could not serve a hospital (corporate account) because 
not everyone working in the hospital shares the same profession.
    If a TIP designated credit union wishes to convert to a 
different TIP or employer-based occupational common bond, or 
different charter type, it only retains members of record after the 
conversion. The Office of Consumer Protection Director, for safety 
and soundness reasons, may approve a TIP designated credit union to 
convert to its original field of membership.

II.B--Occupational Common Bond Amendments

II.B.1--General

    Section 5 of every single occupational federal credit union's 
charter defines the field of membership the credit union can legally 
serve. Only those persons or legal entities specified in the field 
of membership can be served. There are a number of instances in 
which Section 5 must be amended by NCUA.
    First, a group sharing the credit union's common bond is added 
to the field of membership. This may occur through various ways 
including agreement between the group and the credit union directly, 
or through a merger, corporate acquisition, purchase and assumption 
(P&A), or spin-off.
    Second, if the entire field of membership is acquired by another 
corporation, the credit union can serve the employees of the new 
corporation and any subsidiaries after receiving NCUA approval.
    Third, a federal credit union qualifies to change its common 
bond from:
     A single occupational common bond to a single 
associational common bond;
     A single occupational common bond to a community 
charter; or
     A single occupational common bond to a multiple common 
bond.
    Fourth, a federal credit union removes a portion of the group 
from its field of membership through agreement with the group, a 
spin-off, or because a portion of the group is no longer in 
existence.
    An existing single occupational common bond federal credit union 
that submits a request to amend its charter must provide 
documentation to establish that the occupational common bond 
requirement has been met. The Office of Consumer Protection Director 
must approve all amendments to an occupational common bond credit 
union's field of membership.

II.B.2--Corporate Restructuring

    If the single common bond group that comprises a federal credit 
union's field of membership undergoes a substantial restructuring, 
the result is often that portions of the group are sold or spun off. 
This requires a change to the credit union's field of membership. 
NCUA will not permit a single common bond credit union to maintain 
in its field of membership a sold or spun-off group to which it has 
been providing service unless the group otherwise qualifies for 
membership in the credit union or the credit union converts to a 
multiple common bond credit union.
    If the group comprising the single common bond of the credit 
union merges with, or is acquired by, another group, the credit 
union can serve the new group resulting from the merger or 
acquisition after receiving a housekeeping amendment.

II.B.3--Economic Advisability

    Prior to granting a common bond expansion, NCUA will examine the 
amendment's likely effect on the credit union's operations and 
financial condition. In most cases, the information needed for 
analyzing the effect of adding a particular group will be available 
to NCUA through the examination and financial and statistical 
reports; however, in particular cases, the Office of Consumer 
Protection Director may require additional information prior to 
making a decision.

II.B.4--Documentation Requirements

    A federal credit union requesting a common bond expansion must 
submit an Application for Field of Membership Amendment (NCUA 4015-
EZ) to the Office of Consumer Protection Director. An authorized 
credit union representative must sign the request.

II.C--NCUA's Procedures for Amending the Field of Membership

II.C.1--General

    All requests for approval to amend a federal credit union's 
charter must be submitted to the Office of Consumer Protection 
Director.

II.C.2--Office of Consumer Protection Director Decision

    NCUA staff will review all amendment requests in order to ensure 
compliance with NCUA policy.
    Before acting on a proposed amendment, the Office of Consumer 
Protection Director may require an on-site review. In addition, the 
Office of Consumer Protection Director may, after taking into 
account the significance of the proposed field of membership 
amendment, require the applicant to submit a business plan 
addressing specific issues.
    The financial and operational condition of the requesting credit 
union will be considered in every instance. NCUA will carefully 
consider the economic advisability of expanding the field of 
membership of a credit union with financial or operational problems.
    In most cases, field of membership amendments will only be 
approved for credit unions that are operating satisfactorily. 
Generally, if a federal credit union is having difficulty providing 
service to its current membership, or is experiencing financial or 
other operational problems, it may have more difficulty serving an 
expanded field of membership.
    Occasionally, however, an expanded field of membership may 
provide the basis for reversing current financial problems. In such 
cases, an amendment to expand the field of membership may be granted 
notwithstanding the credit union's financial or operational 
problems. The applicant credit union must clearly establish that the 
expanded field of membership is in the best interest of the members 
and will not increase the risk to the NCUSIF.

II.C.3--Office of Consumer Protection Director Approval

    If the Office of Consumer Protection Director approves the 
requested amendment, the credit union will be issued an amendment to 
Section 5 of its charter.

II.C.4--Office of Consumer Protection Director Disapproval

    When the Office of Consumer Protection Director disapproves any 
application, in whole or in part, to amend the field of membership 
under this chapter, the applicant will be informed in writing of 
the:
     Specific reasons for the action;
     Options to consider, if appropriate, for gaining 
approval; and
     Appeal procedure.

II.C.5--Appeal of Office of Consumer Protection Director Decision

    If a field of membership expansion request, merger, or spin-off 
is denied by staff, the federal credit union may appeal the decision 
to the NCUA Board. An appeal must be sent to the NCUA Board 
Secretary within 60 days of the date of denial. The appeal must be 
clearly identified as such and must address the specific reason(s) 
the federal credit union disagrees with the denial. A copy of the 
appeal must be sent to the Office of Consumer Protection, or as 
applicable, the appropriate regional office. NCUA central office 
staff will make an independent review of the facts and present the 
appeal to the Board with a recommendation.
    Before appealing, the credit union may, within 30 days of the 
denial, provide supplemental information to the office rendering the 
initial decision for reconsideration. A reconsideration will contain 
new and material evidence addressing the reasons for the initial 
denial. The office rendering the initial decision will have 30 days 
from the date of the receipt of the request for reconsideration to 
make a final decision. If the request is again denied, the applicant 
may proceed with the appeal process within 60 days of the date of 
the last denial. A second request for reconsideration will be 
treated as an appeal to the NCUA Board.

II.D--Mergers, Purchase and Assumptions, and Spin-Offs

    In general, other than the addition of common bond groups, there 
are three additional ways a federal credit union with a single 
occupational common bond can expand its field of membership:
     By taking in the field of membership of another credit 
union through a common bond or emergency merger;
     By taking in the field of membership of another credit 
union through a common bond or emergency purchase and assumption 
(P&A); or

[[Page 76762]]

     By taking a portion of another credit union's field of 
membership through a common bond spin-off.

II.D.1--Mergers

    Generally, the requirements applicable to field of membership 
expansions found in this chapter apply to mergers where the 
continuing credit union has a federal charter. That is, the two 
credit unions must share a common bond.
    Where the merging credit union is state-chartered, the common 
bond rules applicable to a federal credit union apply.
    Mergers must be approved by the NCUA regional director where the 
continuing credit union is headquartered, with the concurrence of 
the regional director of the merging credit union, and, as 
applicable, the state regulators.
    If a single occupational credit union wants to merge into a 
multiple common bond or community credit union, Section IV.D or 
Section V.D of this chapter, respectively, should be reviewed.

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.
    If not corrected, conditions that could lead to insolvency 
include, but are not limited to:
     Abandonment by management;
     Loss of sponsor;
     Serious and persistent recordkeeping problems; or
     Serious and persistent operational concerns.
    In an emergency merger situation, NCUA will take an active role 
in finding a suitable merger partner (continuing credit union). NCUA 
is primarily concerned that the continuing credit union has the 
financial strength and management expertise to absorb the troubled 
credit union without adversely affecting its own financial condition 
and stability.
    As a stipulated condition to an emergency merger, the field of 
membership of the merging credit union may be transferred intact to 
the continuing federal credit union without regard to any common 
bond restrictions. Under this authority, therefore, a single 
occupational common bond federal credit union may take into its 
field of membership any dissimilar charter type.
    The common bond characteristic of the continuing credit union in 
an emergency merger does not change. That is, even though the 
merging credit union is a multiple common bond or community, the 
continuing credit union will remain a single common bond credit 
union. Similarly, if the merging credit union is also an unlike 
single common bond, the continuing credit union will remain a single 
common bond credit union. Future common bond expansions will be 
based on the continuing credit union's original single common bond.
    Emergency mergers involving federally insured credit unions in 
different NCUA regions must be approved by the regional director 
where the continuing credit union is headquartered, with the 
concurrence of the regional director of the merging credit union 
and, as applicable, the state regulators.

II.D.3--Purchase and Assumption (P&A)

    Another alternative for acquiring the field of membership of a 
failing credit union is through a consolidation known as a P&A. A 
P&A has limited application because, in most cases, the failing 
credit union must be placed into involuntary liquidation. In the few 
instances where a P&A may be appropriate, the assuming federal 
credit union, as with emergency mergers, may acquire the entire 
field of membership if the emergency merger criteria are satisfied. 
However, if the P&A does not meet the emergency merger criteria, it 
must be processed under the common bond requirements.
    In a P&A processed under the emergency criteria, specified 
loans, shares, and certain other designated assets and liabilities, 
without regard to common bond restrictions, may also be acquired 
without changing the character of the continuing federal credit 
union for purposes of future field of membership amendments.
    If the purchased and/or assumed credit union's field of 
membership does not share a common bond with the purchasing and/or 
assuming credit union, then the continuing credit union's original 
common bond will be controlling for future common bond expansions.
    P&As involving federally insured credit unions in different NCUA 
regions must be approved by the regional director where the 
continuing credit union is headquartered, with the concurrence of 
the regional director of the purchased and/or assumed credit union 
and, as applicable, the state regulators.

II.D.4--Spin-Offs

    A spin-off occurs when, by agreement of the parties, a portion 
of the field of membership, assets, liabilities, shares, and capital 
of a credit union are transferred to a new or existing credit union. 
A spin-off is unique in that usually one credit union has a field of 
membership expansion and the other loses a portion of its field of 
membership.
    All common bond requirements apply regardless of whether the 
spun-off group becomes a new credit union or goes to an existing 
federal charter.
    The request for approval of a spin-off must be supported with a 
plan that addresses, at a minimum:
     Why the spin-off is being requested;
     What part of the field of membership is to be spun off;
     Whether the affected credit unions have a common bond 
(applies only to single occupational credit unions);
     Which assets, liabilities, shares, and capital are to 
be transferred;
     The financial impact the spin-off will have on the 
affected credit unions;
     The ability of the acquiring credit union to 
effectively serve the new members;
     The proposed spin-off date; and
     Disclosure to the members of the requirements set forth 
above.
    The spin-off request must also include current financial 
statements from the affected credit unions and the proposed voting 
ballot.
    For federal credit unions spinning off a group, membership 
notice and voting requirements and procedures are the same as for 
mergers (see part 708 of the NCUA Rules and Regulations), except 
that only the members directly affected by the spin-off--those whose 
shares are to be transferred--are permitted to vote. Members whose 
shares are not being transferred will not be afforded the 
opportunity to vote. All members of the group to be spun off 
(whether they voted in favor, against, or not at all) will be 
transferred if the spin-off is approved by the voting membership. 
Voting requirements for federally insured state credit unions are 
governed by state law.
    Spin-offs involving federally insured credit unions in different 
NCUA regions must be approved by all regional directors where the 
credit unions are headquartered and the state regulators, as 
applicable. Spin-offs in the same region also require approval by 
the state regulator, as applicable. Spin-offs involving the creation 
of a new federally insured credit union require the approval of the 
Office of Consumer Protection Director. The Office of Consumer 
Protection also provides advice regarding field of membership 
compatibility when appropriate.

II.E--Overlaps

II.E.1--General

    An overlap exists when a group of persons is eligible for 
membership in two or more credit unions. NCUA will permit single 
occupational federal credit unions to overlap any other charter 
without performing an overlap analysis.

II.E.2--Organizational Restructuring

    A federal credit union's field of membership will always be 
governed by the common bond descriptions contained in Section 5 of 
its charter. Where a sponsor organization expands its operations 
internally, by acquisition or otherwise, the credit union may serve 
these new entrants to its field of membership if they are part of 
the common bond described in Section 5. NCUA will permit a complete 
overlap of the credit unions' fields of membership.
    If a sponsor organization sells off a group, new members can no 
longer be served unless they otherwise qualify for membership in the 
credit union or it converts to a multiple common bond charter.
    Credit unions must submit documentation explaining the 
restructuring and providing information regarding the new 
organizational structure.

II.E.3--Exclusionary Clauses

    An exclusionary clause is a limitation precluding the credit 
union from serving the primary members of a portion of a group 
otherwise included in its field of membership. NCUA no longer grants 
exclusionary clauses. Those granted prior to

[[Page 76763]]

the adoption of this new Chartering and Field of Membership Manual 
will remain in effect unless the credit unions agree to remove them 
or one of the affected credit unions submits a housekeeping 
amendment to have it removed.

II.F--Charter Conversion

    A single occupational common bond federal credit union may apply 
to convert to a community charter provided the field of membership 
requirements of the community charter are met. Groups within the 
existing charter which cannot qualify in the new charter cannot be 
served except for members of record, or groups or communities 
obtained in an emergency merger or P&A. A credit union must notify 
all groups that will be removed from the field of membership as a 
result of conversion. Members of record can continue to be served. 
Also, in order to support a case for a conversion, the applicant 
federal credit union may be required to develop a detailed business 
plan as specified in Chapter 2, Section V.A.3 of this manual.
    A single occupational common bond federal credit union may apply 
to convert to a multiple common bond charter by adding a non-common 
bond group that is within a reasonable proximity of a service 
facility. Groups within the existing charter may be retained and 
continue to be served. However, future amendments, including any 
expansions of the original single common bond group, must be done in 
accordance with multiple common bond policy.

II.G--Removal of Groups From the Field of Membership

    A credit union may request removal of a portion of the common 
bond group from its field of membership for various reasons. The 
most common reasons for this type of amendment are:
     The group is within the field of membership of two 
credit unions and one wishes to discontinue service;
     The federal credit union cannot continue to provide 
adequate service to the group;
     The group has ceased to exist;
     The group does not respond to repeated requests to 
contact the credit union or refuses to provide needed support; or
     The group initiates action to be removed from the field 
of membership.
    When a federal credit union requests an amendment to remove a 
group from its field of membership, the Office of Consumer 
Protection Director will determine why the credit union desires to 
remove the group. If the Office of Consumer Protection Director 
concurs with the request, membership will continue for those who are 
already members under the ``once a member, always a member'' 
provision of the Federal Credit Union Act.

II.H--Other Persons Eligible for Credit Union Membership

    A number of persons, by virtue of their close relationship to a 
common bond group, may be included, at the charter applicant's 
option, in the field of membership. These include the following:
     Spouses of persons who died while within the field of 
membership of this credit union;
     Employees of this credit union;
     Persons retired as pensioners or annuitants from the 
above employment;
     Volunteers;
     Members of the immediate family or household;
     Honorably discharged veterans who served in any of the 
Armed Services of the United States listed in this charter;
    Organizations of such persons; and
     Corporate or other legal entities in this charter.
    Immediate family is defined as spouse, child, sibling, parent, 
grandparent, or grandchild. This includes stepparents, stepchildren, 
stepsiblings, and adoptive relationships.
    Household is defined as persons living in the same residence 
maintaining a single economic unit.
    Membership eligibility is extended only to individuals who are 
members of an ``immediate family or household'' of a credit union 
member. It is not necessary for the primary member to join the 
credit union in order for the immediate family or household member 
of the primary member to join, provided the immediate family or 
household clause is included in the field of membership. However, it 
is necessary for the immediate family member or household member to 
first join in order for that person's immediate family member or 
household member to join the credit union. A credit union can adopt 
a more restrictive definition of immediate family or household.
    Volunteers, by virtue of their close relationship with a sponsor 
group, may be included. Examples include volunteers working at a 
hospital or school.
    Under the Federal Credit Union Act, once a person becomes a 
member of the credit union, such person may remain a member of the 
credit union until the person chooses to withdraw or is expelled 
from the membership of the credit union. This is commonly referred 
to as ``once a member, always a member.'' The ``once a member, 
always a member'' provision does not prevent a credit union from 
restricting services to members who are no longer within the field 
of membership.

III--Associational Common Bond

III.A.1--General

    A single associational federal credit union may include in its 
field of membership, regardless of location, all members and 
employees of a recognized association. A single associational common 
bond consists of individuals (natural persons) and/or groups (non-
natural persons) whose members participate in activities developing 
common loyalties, mutual benefits, and mutual interests. Separately 
chartered associational groups can establish a single common bond 
relationship if they are integrally related and share common goals 
and purposes. For example, two or more churches of the same 
denomination, Knights of Columbus Councils, or locals of the same 
union can qualify as a single associational common bond. Individuals 
and groups eligible for membership in a single associational credit 
union can include the following:
     Natural person members of the association (for example, 
members of a union or church members);
     Non-natural person members of the association;
     Employees of the association (for example, employees of 
the labor union or employees of the church); and
     The association.
    Generally, a single associational common bond does not include a 
geographic definition and can operate nationally. However, a 
proposed or existing federal credit union may limit its field of 
membership to a single association or geographic area. NCUA may 
impose a geographic limitation if it is determined that the 
applicant credit union does not have the ability to serve a larger 
group or there are other operational concerns. All single 
associational common bonds should include a definition of the group 
that may be served based on the association's charter, bylaws, and 
any other equivalent documentation.
    Applicants for a single associational common bond federal credit 
union charter or a field of membership amendment to include an 
association must provide, at the request of NCUA, a copy of the 
association's charter, bylaws, or other equivalent documentation, 
including any legal documents required by the state or other 
governing authority. The associational sponsor itself may also be 
included in the field of membership--e.g., ``Sprocket 
Association''--and will be shown in the last clause of the field of 
membership.

III.A.1.a--Threshold Requirement Regarding the Purpose for Which an 
Associational Group Is Formed and the Totality of the Circumstances 
Criteria

    As a threshold matter, when reviewing an application to include 
an association in a federal credit union's field of membership, NCUA 
will determine if the association has been formed primarily for the 
purpose of expanding credit union membership. If NCUA makes such a 
determination, then the analysis ends and the association is denied 
inclusion in the federal credit union's field of membership. If NCUA 
determines that the association was formed to serve some other 
separate function as an organization, then NCUA will apply the 
following totality of the circumstances test to determine if the 
association satisfies the associational common bond requirements. 
The totality of the circumstances test consists of the following 
factors:
    1. Whether the association provides opportunities for members to 
participate in the furtherance of the goals of the association;
    2. Whether the association maintains a membership list;
    3. Whether the association sponsors other activities;
    4. Whether the association's membership eligibility requirements 
are authoritative;
    5. Whether members pay dues;
    6. Whether the members have voting rights; to meet this 
requirement, members need not vote directly for an officer, but may 
vote for a delegate who in turn represents the members' interests;
    7. The frequency of meetings; and

[[Page 76764]]

    8. Separateness--NCUA reviews if there is corporate separateness 
between the group and the federal credit union. The group and the 
federal credit union must operate in a way that demonstrates the 
separate corporate existence of each entity. Specifically, this 
means the federal credit union's and the group's respective business 
transactions, accounts, and corporate records are not intermingled.
    No one factor alone is determinative of membership eligibility 
as an association. The totality of the circumstances controls over 
any individual factor in the test. However, NCUA's primary focus 
will be on factors 1-4 of this section.

III.A.1.b--Pre-Approved Groups

    NCUA automatically approves the below groups as satisfying the 
associational common bond provisions. NCUA only approves regular 
members of an approved group. Honorary, affiliate, or non-regular 
members do not qualify.
    These groups are:
    (1) Alumni associations;
    (2) Religious organizations, including churches or groups of 
related churches;
    (3) Electric cooperatives;
    (4) Homeowner associations;
    (5) Labor unions;
    (6) Scouting groups;
    (7) Parent teacher associations (PTAs) organized at the local 
level to serve a single school district;
    (8) Chamber of commerce groups (members only and not employees 
of members);
    (9) Athletic booster clubs whose members have voting rights;
    (10) Fraternal organizations or civic groups with a mission of 
community service whose members have voting rights;
    (11) Organizations having a mission based on preserving or 
furthering the culture of a particular national or ethnic origin; 
and
    (12) Organizations promoting social interaction or educational 
initiatives among persons sharing a common occupational profession.

III.A.1.c--Additional Information

    A support group whose members are continually changing or whose 
duration is temporary may not meet the single associational common 
bond criteria. Each class of member will be evaluated based on the 
totality of the circumstances. Individuals or honorary members who 
only make donations to the association are not eligible to join the 
credit union.
    Student groups (e.g., students enrolled at a public, private, or 
parochial school) may constitute either an associational or 
occupational common bond. For example, students enrolled at a church 
sponsored school could share a single associational common bond with 
the members of that church and may qualify for a federal credit 
union charter. Similarly, students enrolled at a university, as a 
group by itself, or in conjunction with the faculty and employees of 
the school, could share a single occupational common bond and may 
qualify for a federal credit union charter.
    Tenant groups, consumer groups, and other groups of persons 
having an ``interest in'' a particular cause and certain consumer 
cooperatives may also qualify as an association.
    Associations based primarily on a client-customer relationship 
do not meet associational common bond requirements. Health clubs are 
an example of a group not meeting associational common bond 
requirements, including YMCAs. However, having an incidental client-
customer relationship does not preclude an associational charter as 
long as the associational common bond requirements are met. For 
example, a fraternal association that offers insurance, which is not 
a condition of membership, may qualify as a valid associational 
common bond.

III.A.2--Subsequent Changes to Association's Bylaws

    If the association's membership or geographical definitions in 
its charter and bylaws are changed subsequent to the effective date 
stated in the field of membership, the credit union must submit the 
revised charter or bylaws for NCUA's consideration and approval 
prior to serving members of the association added as a result of the 
change.

III.A.3--Sample Single Associational Common Bonds

    Some examples of associational common bonds are:
     Regular members of Locals 10 and 13, IBEW, in Florida, 
who qualify for membership in accordance with their charter and 
bylaws in effect on May 20, 2001;
     Members of the Hoosier Farm Bureau in Grant, Logan, or 
Lee Counties of Indiana, who qualify for membership in accordance 
with its charter and bylaws in effect on March 7, 1997;
     Members of the Shalom Congregation in Chevy Chase, 
Maryland;
     Regular members of the Corporate Executives 
Association, located in Westchester, New York, who qualify for 
membership in accordance with its charter and bylaws in effect on 
December 1, 1997;
     Members of the University of Wisconsin Alumni 
Association, located in Green Bay, Wisconsin;
     Members of the Marine Corps Reserve Officers 
Association; or
     Members of St. John's Methodist Church and St. Luke's 
Methodist Church, located in Toledo, Ohio.
    Some examples of insufficiently defined single associational 
common bonds are:
     All Lutherans in the United States (too broadly 
defined); or
     Veterans of U.S. military service (group is too broadly 
defined; no formal association of all members of the group).
    Some examples of unacceptable single associational common bonds 
are:
     Alumni of Amos University (no formal association);
     Customers of Fleetwood Insurance Company (policyholders 
or primarily customer/client relationships do not meet associational 
standards);
     Employees of members of the Reston, Virginia, Chamber 
of Commerce (not a sufficiently close tie to the associational 
common bond); or
     Members of St. John's Lutheran Church and St. Mary's 
Catholic Church located in Anniston, Alabama (churches are not of 
the same denomination).

III.B--Associational Common Bond Amendments

III.B.1--General

    Section 5 of every associational federal credit union's charter 
defines the field of membership the credit union can legally serve. 
Only those persons who, or legal entities that, join the credit 
union and are specified in the field of membership can be served. 
There are three instances in which Section 5 must be amended by 
NCUA.
    First, a group that shares the credit union's common bond is 
added to the field of membership. This may occur through various 
ways including agreement between the group and the credit union 
directly, or through a merger, purchase and assumption (P&A), or 
spin-off.
    Second, a federal credit union qualifies to change its common 
bond from:
     A single associational common bond to a single 
occupational common bond;
     A single associational common bond to a community 
charter; or
     A single associational common bond to a multiple common 
bond.
    Third, a federal credit union removes a portion of the group 
from its field of membership through agreement with the group, a 
spin-off, or a portion of the group that is no longer in existence.
    An existing single associational federal credit union that 
submits a request to amend its charter must provide documentation to 
establish that the associational common bond requirement has been 
met. The Office of Consumer Protection Director must approve all 
amendments to an associational common bond credit union's field of 
membership.

III.B.2--Organizational Restructuring

    If the single common bond group that comprises a federal credit 
union's field of membership undergoes a substantial restructuring, 
the result is often that portions of the group are sold or spun off. 
This is an event requiring a change to the credit union's field of 
membership. NCUA may not permit a single associational credit union 
to maintain in its field of membership a sold or spun-off group to 
which it has been providing service unless the group otherwise 
qualifies for membership in the credit union or the credit union 
converts to a multiple common bond credit union.
    If the group comprising the single common bond of the credit 
union merges with, or is acquired by, another group, the credit 
union can serve the new group resulting from the merger or 
acquisition after receiving a housekeeping amendment.

III.B.3--Economic Advisability

    Prior to granting a common bond expansion, NCUA will examine the 
amendment's likely impact on the credit union's operations and 
financial condition. In most cases, the information needed for 
analyzing the effect of adding a particular group will be available 
to NCUA through the examination and financial and statistical 
reports; however, in particular cases, the Office of Consumer 
Protection Director may

[[Page 76765]]

require additional information prior to making a decision.

III.B.4--Documentation Requirements

    A federal credit union requesting a common bond expansion must 
submit an Application for Field of Membership Amendment (NCUA 4015-
EZ) to the Office of Consumer Protection Director. An authorized 
credit union representative must sign the request.

III.C--NCUA Procedures for Amending the Field of Membership

III.C.1--General

    All requests for approval to amend a federal credit union's 
charter must be submitted to the Office of Consumer Protection 
Director.

III.C.2--Office of Consumer Protection Director Decision

    NCUA staff will review all amendment requests in order to ensure 
conformance to NCUA policy.
    Before acting on a proposed amendment, the Office of Consumer 
Protection Director may require an on-site review. In addition, the 
Office of Consumer Protection Director may, after taking into 
account the significance of the proposed field of membership 
amendment, require the applicant to submit a business plan 
addressing specific issues.
    The financial and operational condition of the requesting credit 
union will be considered in every instance. The economic 
advisability of expanding the field of membership of a credit union 
with financial or operational problems must be carefully considered.
    In most cases, field of membership amendments will only be 
approved for credit unions that are operating satisfactorily. 
Generally, if a federal credit union is having difficulty providing 
service to its current membership, or is experiencing financial or 
other operational problems, it may have more difficulty serving an 
expanded field of membership.
    Occasionally, however, an expanded field of membership may 
provide the basis for reversing current financial problems. In such 
cases, an amendment to expand the field of membership may be granted 
notwithstanding the credit union's financial or operational 
problems. The applicant credit union must clearly establish that the 
expanded field of membership is in the best interest of the members 
and will not increase the risk to the NCUSIF.

III.C.3--Office of Consumer Protection Director Approval

    If the Office of Consumer Protection Director approves the 
requested amendment, the credit union will be issued an amendment to 
Section 5 of its charter.

III.C.4--Office of Consumer Protection Director Disapproval

    When the Office of Consumer Protection Director disapproves any 
application, in whole or in part, to amend the field of membership 
under this chapter, the applicant will be informed in writing of 
the:
     Specific reasons for the action;
     Options to consider, if appropriate, for gaining 
approval; and
     Appeal procedures.

III.C.5--Appeal of Office of Consumer Protection Director Decision

    If a field of membership expansion request, merger, or spin-off 
is denied by staff, the federal credit union may appeal the decision 
to the NCUA Board. An appeal must be sent to the NCUA Board 
Secretary within 60 days of the date of denial and must be clearly 
identified as such and address the reason(s) the federal credit 
union disagrees with the denial. A copy of the appeal must be sent 
to the Office of Consumer Protection, or as applicable, the 
appropriate regional office. NCUA central office staff will make an 
independent review of the facts and present the appeal to the NCUA 
Board with a recommendation.
    Before appealing, the credit union may, within 30 days of the 
denial, provide supplemental information to the office rendering the 
initial decision for reconsideration. A reconsideration will contain 
new and material evidence addressing the reasons for the initial 
denial. The office rendering the initial decision will have 30 days 
from the date of the receipt of the request for reconsideration to 
make a final decision. If the request is again denied, the applicant 
may proceed with the appeal process within 60 days of the date of 
the last denial. A second request for reconsideration will be 
treated as an appeal to the NCUA Board.

III.D--Mergers, Purchase and Assumptions, and Spin-Offs

    In general, other than the addition of common bond groups, there 
are three additional ways a federal credit union with a single 
associational common bond can expand its field of membership:
     By taking in the field of membership of another credit 
union through a common bond or emergency merger;
     By taking in the field of membership of another credit 
union through a common bond or emergency purchase and assumption 
(P&A); or
     By taking a portion of another credit union's field of 
membership through a common bond spin-off.

III.D.1--Mergers

    Generally, the requirements applicable to field of membership 
expansions found in this section apply to mergers where the 
continuing credit union is a federal charter. That is, the two 
credit unions must share a common bond.
    Where the merging credit union is state-chartered, the common 
bond rules applicable to a federal credit union apply.
    Mergers must be approved by the NCUA regional director where the 
continuing credit union is headquartered, with the concurrence of 
the regional director of the merging credit union, and, as 
applicable, the state regulators.
    If a single associational credit union wants to merge into a 
multiple common bond or community credit union, Section IV.D or 
Section V.D of this chapter, respectively, should be reviewed.

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.
    If not corrected, conditions that could lead to insolvency 
include, but are not limited to:
     Abandonment by management;
     Loss of sponsor;
     Serious and persistent record-keeping problems; or
     Serious and persistent operational concerns.
    In an emergency merger situation, NCUA will take an active role 
in finding a suitable merger partner (continuing credit union). NCUA 
is primarily concerned that the continuing credit union has the 
financial strength and management expertise to absorb the troubled 
credit union without adversely affecting its own financial condition 
and stability.
    As a stipulated condition to an emergency merger, the field of 
membership of the merging credit union may be transferred intact to 
the continuing federal credit union without regard to any common 
bond restrictions. Under this authority, therefore, a single 
associational common bond federal credit union may take into its 
field of membership any dissimilar charter type.
    The common bond characteristic of the continuing credit union in 
an emergency merger does not change. That is, even though the 
merging credit union is a multiple common bond or community, the 
continuing credit union will remain a single common bond credit 
union. Similarly, if the merging credit union is an unlike single 
common bond, the continuing credit union will remain a single common 
bond credit union. Future common bond expansions will be based on 
the continuing credit union's single common bond.
    Emergency mergers involving federally insured credit unions in 
different NCUA regions must be approved by the regional director 
where the continuing credit union is headquartered, with the 
concurrence of the regional director of the merging credit union 
and, as applicable, the state regulators.

III.D.3--Purchase and Assumption (P&A)

    Another alternative for acquiring the field of membership of a 
failing credit union is through a consolidation known as a P&A. A 
P&A has limited application because, in most cases, the failing 
credit union must be placed into involuntary liquidation. In the few 
instances where a P&A may be appropriate, the assuming federal 
credit union, as with emergency mergers, may acquire the entire 
field of membership if the emergency merger

[[Page 76766]]

criteria are satisfied. However, if the P&A does not meet the 
emergency merger criteria, it must be processed under the common 
bond requirements.
    In a P&A processed under the emergency criteria, specified 
loans, shares, and certain other designated assets and liabilities, 
without regard to common bond restrictions, may also be acquired 
without changing the character of the continuing federal credit 
union for purposes of future field of membership amendments.
    If the purchased and/or assumed credit union's field of 
membership does not share a common bond with the purchasing and/or 
assuming credit union, then the continuing credit union's original 
common bond will be controlling for future common bond expansions.
    P&As involving federally insured credit unions in different NCUA 
regions must be approved by the regional director where the 
continuing credit union is headquartered, with the concurrence of 
the regional director of the purchased and/or assumed credit union 
and, as applicable, the state regulators.

III.D.4--Spin-Offs

    A spin-off occurs when, by agreement of the parties, a portion 
of the field of membership, assets, liabilities, shares, and capital 
of a credit union are transferred to a new or existing credit union. 
A spin-off is unique in that usually one credit union has a field of 
membership expansion and the other loses a portion of its field of 
membership.
    All common bond requirements apply regardless of whether the 
spun-off group becomes a new credit union or goes to an existing 
federal charter.
    The request for approval of a spin-off must be supported with a 
plan that addresses, at a minimum:
     Why the spin-off is being requested;
     What part of the field of membership is to be spun off;
     Whether the affected credit unions have the same common 
bond (applies only to single associational credit unions);
     Which assets, liabilities, shares, and capital are to 
be transferred;
     The financial impact the spin-off will have on the 
affected credit unions;
     The ability of the acquiring credit union to 
effectively serve the new members;
     The proposed spin-off date; and
     Disclosure to the members of the requirements set forth 
above.
    The spin-off request must also include current financial 
statements from the affected credit unions and the proposed voting 
ballot.
    For federal credit unions spinning off a group, membership 
notice and voting requirements and procedures are the same as for 
mergers (see part 708 of the NCUA Rules and Regulations), except 
that only the members directly affected by the spin-off--those whose 
shares are to be transferred--are permitted to vote. Members whose 
shares are not being transferred will not be afforded the 
opportunity to vote. All members of the group to be spun off 
(whether they voted in favor, against, or not at all) will be 
transferred if the spin-off is approved by the voting membership. 
Voting requirements for federally insured state credit unions are 
governed by state law.
    Spin-offs involving federally insured credit unions in different 
NCUA regions must be approved by all regional directors where the 
credit unions are headquartered and the state regulators, as 
applicable. Spin-offs in the same region also require approval by 
the state regulator, as applicable. Spin-offs involving the creation 
of a new federally insured credit union require the approval of the 
Office of Consumer Protection Director. The Office of Consumer 
Protection also provides advice regarding field of membership 
compatibility when appropriate.

III.E--Overlaps

III.E.1--General

    An overlap exists when a group of persons is eligible for 
membership in two or more credit unions. NCUA will permit single 
associational federal credit unions to overlap any other charters 
without performing an overlap analysis.

III.E.2--Organizational Restructuring

    A federal credit union's field of membership will always be 
governed by the common bond descriptions contained in Section 5 of 
its charter. Where a sponsor organization expands its operations 
internally, by acquisition or otherwise, the credit union may serve 
these new entrants to its field of membership if they are part of 
the common bond described in Section 5. NCUA will permit a complete 
overlap of the credit unions' fields of membership. If a sponsor 
organization sells off a group, new members can no longer be served 
unless they otherwise qualify for membership in the credit union or 
it converts to a multiple common bond.
    Credit unions must submit documentation explaining the 
restructuring and providing information regarding the new 
organizational structure.

III.E.3--Exclusionary Clauses

    An exclusionary clause is a limitation precluding the credit 
union from serving the primary members of a portion of a group 
otherwise included in its field of membership. NCUA no longer grants 
exclusionary clauses. Those granted prior to the adoption of this 
new Chartering and Field of Membership Manual will remain in effect 
unless the credit unions agree to remove them or one of the affected 
credit unions submits a housekeeping amendment to have it removed.

III.F--Charter Conversions

    A single associational common bond federal credit union may 
apply to convert to a community charter provided the field of 
membership requirements of the community charter are met. Groups 
within the existing charter which cannot qualify in the new charter 
cannot be served except for members of record, or groups or 
communities obtained in an emergency merger or P&A. A credit union 
must notify all groups that will be removed from the field of 
membership as a result of conversion. Members of record can continue 
to be served. Also, in order to support a case for a conversion, the 
applicant federal credit union may be required to develop a detailed 
business plan as specified in Chapter 2, Section V.A.3 of this 
manual.
    A single associational common bond federal credit union may 
apply to convert to a multiple common bond charter by adding a non-
common bond group that is within a reasonable proximity of a service 
facility. Groups within the existing charter may be retained and 
continue to be served. However, future amendments, including any 
expansions of the original single common bond group, must be done in 
accordance with multiple common bond policy.

III.G--Removal of Groups From the Field of Membership

    A credit union may request removal of a portion of the common 
bond group from its field of membership for various reasons. The 
most common reasons for this type of amendment are:
     The group is within the field of membership of two 
credit unions and one wishes to discontinue service;
     The federal credit union cannot continue to provide 
adequate service to the group;
     The group has ceased to exist;
     The group does not respond to repeated requests to 
contact the credit union or refuses to provide needed support; or
     The group initiates action to be removed from the field 
of membership.
    When a federal credit union requests an amendment to remove a 
group from its field of membership, the Office of Consumer 
Protection Director will determine why the credit union desires to 
remove the group. If the Office of Consumer Protection Director 
concurs with the request, membership will continue for those who are 
already members under the ``once a member, always a member'' 
provision of the Federal Credit Union Act.

III.H--Other Persons Eligible for Credit Union Membership

    A number of persons by virtue of their close relationship to a 
common bond group may be included, at the charter applicant's 
option, in the field of membership. These include the following:
     Spouses of persons who died while within the field of 
membership of this credit union;
     Employees of this credit union;
     Volunteers;
     Members of the immediate family or household;
     Honorably discharged veterans who served in any of the 
Armed Services of the United States in this charter;
    Organizations of such persons; and
     Corporate or other legal entities in this charter.
    Immediate family is defined as spouse, child, sibling, parent, 
grandparent, or grandchild. This includes stepparents, stepchildren, 
stepsiblings, and adoptive relationships.
    Household is defined as persons living in the same residence 
maintaining a single economic unit.
    Membership eligibility is extended only to individuals who are 
members of an ``immediate family or household'' of a credit

[[Page 76767]]

union member. It is not necessary for the primary member to join the 
credit union in order for the immediate family or household member 
of the primary member to join, provided the immediate family or 
household clause is included in the field of membership. However, it 
is necessary for the immediate family member or household member to 
first join in order for that person's immediate family member or 
household member to join the credit union. A credit union can adopt 
a more restrictive definition of immediate family or household.
    Volunteers, by virtue of their close relationship with a sponsor 
group, may be included. One example is volunteers working at a 
church.
    Under the Federal Credit Union Act, once a person becomes a 
member of the credit union, such person may remain a member of the 
credit union until the person chooses to withdraw or is expelled 
from the membership of the credit union. This is commonly referred 
to as ``once a member, always a member.'' The ``once a member, 
always a member'' provision does not prevent a credit union from 
restricting services to members who are no longer within the field 
of membership.

IV--Multiple Occupational/Associational Common Bonds

IV.A.1--General

    A federal credit union may be chartered to serve a combination 
of distinct, definable single occupational and/or associational 
common bonds. This type of credit union is called a multiple common 
bond credit union. Each group in the field of membership must have 
its own occupational or associational common bond. For example, a 
multiple common bond credit union may include two unrelated 
employers, or two unrelated associations, or a combination of two or 
more employers or associations. Additionally, these groups must be 
within reasonable geographic proximity of the credit union. That is, 
the groups must be within the service area of one of the credit 
union's service facilities. These groups are referred to as select 
groups. A multiple common bond credit union cannot include a TIP or 
expand using single common bond criteria.
    Employment in a corporation or other legal entity which is 
related to another legal entity (such as a company under contract 
and possessing a strong dependency relationship with another 
company) makes that person part of the occupational common bond of a 
select employee group within a multiple common bond.
    A multiple common bond credit union is also able to serve the 
employees of tenants who work in an industrial park, such as a 
shopping mall or office park, without listing each occupational 
group, provided that each tenant employee group has fewer than 3,000 
employees at the location. In addition, only employees who work at 
the facility during the tenancy are eligible for membership. New 
tenants would be eligible for membership subject to the above 
requirements.
    A federal credit union's service area is the area that can 
reasonably be served by the service facilities accessible to the 
groups within the field of membership. The service area will most 
often coincide with that geographic area primarily served by the 
service facility. Additionally, the groups served by the credit 
union must have access to the service facility. The non-availability 
of other credit union service is a factor to be considered in 
determining whether the group is within reasonable proximity of a 
credit union wishing to add the group to its field of membership.
    A service facility includes the means for a multiple common bond 
credit union to accept shares for members' accounts, accept loan 
applications from them or disburse loans to them. This definition 
includes a credit union owned branch, a mobile branch, an office 
operated on a regularly scheduled weekly basis, a credit union owned 
ATM, a credit union owned electronic facility, or a credit union's 
transactional Web site that meets the above listed transactional 
requirements (a ``transactional Web site''). A credit union's 
transactional Web site that meets these requirements may be accessed 
by a computer, smart phone, tablet, or similar technological device. 
This definition of service facility does not meet the requirement 
that a credit union establish and maintain an office or facility in 
an underserved area.
    The select group as a whole will be considered to be within a 
credit union's service area when:
     A majority of the persons in a select group live, work, 
or gather regularly within the service area;
     The group's headquarters is located within the service 
area; or
     The group's ``paid from'' or ``supervised from'' 
location is within the service area.

IV.A.2--Sample Multiple Common Bond Field of Membership

    An example of a multiple common bond field of membership is:
    ``The field of membership of this federal credit union shall be 
limited to the following:
    1. Employees of Teltex Corporation who work in Wilmington, 
Delaware;
    2. Partners and employees of Smith & Jones, Attorneys at Law, 
who work in Wilmington, Delaware;
    3. Members of the M&L Association in Wilmington, Delaware, who 
qualify for membership in accordance with its charter and bylaws in 
effect on December 31, 1997;
    4. Employees of tenants with fewer than 3,000 employees of MJB 
Office Park who work in MJB Office Park's Wilmington, Delaware 
location.''

IV.B--Multiple Common Bond Amendments

IV.B.1--General

    Section 5 of every multiple common bond federal credit union's 
charter defines the field of membership and select groups the credit 
union can legally serve. Only those persons or legal entities 
specified in the field of membership can be served. There are a 
number of instances in which Section 5 must be amended by NCUA.
    First, a new select group is added to the field of membership. 
This may occur through agreement between the group and the credit 
union directly, or through a merger, corporate acquisition, purchase 
and assumption (P&A), or spin-off.
    Second, a federal credit union qualifies to change its charter 
from:
     A single occupational or associational charter to a 
multiple common bond charter;
     A multiple common bond to a single occupational or 
associational charter;
     A multiple common bond to a community charter; or
     A community to a multiple common bond charter.
    Third, a federal credit union removes a group from its field of 
membership through agreement with the group, a spin-off, or because 
the group no longer exists.

IV.B.2--Numerical Limitation of Select Groups

    An existing multiple common bond federal credit union that 
submits a request to amend its charter must provide documentation to 
establish that the multiple common bond requirements have been met. 
The Office of Consumer Protection Director must approve all 
amendments to a multiple common bond credit union's field of 
membership.
    NCUA will approve groups to a credit union's field of membership 
if the agency determines in writing that the following criteria are 
met:
     The credit union has not engaged in any unsafe or 
unsound practice, as determined by the Office of Consumer Protection 
Director, with input from the appropriate regional director, which 
is material during the one year period preceding the filing to add 
the group;
     The credit union is ``adequately capitalized'' pursuant 
to part 702 of NCUA's Rules and Regulations. For low-income credit 
unions or credit unions chartered less than ten years, the Office of 
Consumer Protection Director, with input from the appropriate 
regional director, may determine that a less than ``adequately 
capitalized'' credit union can qualify for an expansion if it is 
making reasonable progress toward becoming ``adequately 
capitalized.'' For any other credit union, the Office of Consumer 
Protection Director, with input from the appropriate regional 
director, may determine that a less than ``adequately capitalized'' 
credit union can qualify for an expansion if it is making reasonable 
progress toward becoming ``adequately capitalized,'' and the 
addition of the group would not adversely affect the credit union's 
capitalization level;
     The credit union has the administrative capability to 
serve the proposed group and the financial resources to meet the 
need for additional staff and assets to serve the new group;
     Any potential harm the expansion may have on any other 
credit union and its members is clearly outweighed by the probable 
beneficial effect of the expansion. With respect to a proposed 
expansion's effect on other credit unions, the requirements on 
overlapping fields of membership set forth in Section IV.E of this 
chapter are also applicable; and
     If the formation of a separate credit union by such 
group is not practical and consistent with reasonable standards for 
the safe and sound operation of a credit union.
    Additional information is required for groups of 3,000 or more 
primary potential

[[Page 76768]]

members requesting to be added to a multiple common bond credit 
union. For groups between 3,000 and 4,999 potential members, NCUA 
requires documentation indicating the group has a lack of available 
subsidies, interest among the group's members, and sufficient 
resources. For such cases the NCUA will accept a written statement 
indicating these conditions exist as sufficient documentation the 
group cannot form its own credit union. Groups with 5,000 or more 
members will be subject to the standard application process as 
discussed later in this chapter, requiring a group to fully describe 
its inability to establish a new single common bond credit union.

IV.B.3--Documentation Requirements

    A multiple common bond credit union requesting a select group 
expansion must submit a formal written request, using the 
Application for Field of Membership Amendment (NCUA 4015 or NCUA 
4015-EZ) to the Office of Consumer Protection Director. An 
authorized credit union representative must sign the request.
    The NCUA 4015-EZ (for groups less than 3,000 potential members) 
must be accompanied by the following:
     A letter, or equivalent documentation, from the group 
requesting credit union service. This letter must indicate:
     That the group wants to be added to the applicant 
federal credit union's field of membership;
     The number of persons currently included within the 
group to be added and their locations; and
     The group's proximity to credit union's nearest service 
facility.
     The most recent copy of the group's charter and bylaws 
or equivalent documentation (for associational groups).
    The NCUA 4015 (for groups between 3,000 and 4,999 primary 
potential members) must be accompanied by the following:
     A letter, or equivalent documentation, from the group 
requesting credit union service. This letter must indicate:
     That the group wants to be added to the federal credit 
union's field of membership;
     Whether the group presently has other credit union 
service available;
     The number of persons currently included within the 
group to be added and their locations;
     The group's proximity to credit union's nearest service 
facility, and
     Why the formation of a separate credit union for the 
group is not practical or consistent with safety and soundness 
standards because of a lack of available subsidies, interest among 
the group's members, and sufficient resources.
    The NCUA 4015 (for groups of 5,000 or more primary potential 
members) must be accompanied by the following:
     A letter, or equivalent documentation, from the group 
requesting credit union service. This letter must indicate:
     That the group wants to be added to the federal credit 
union's field of membership;
     Whether the group presently has other credit union 
service available;
     The number of persons currently included within the 
group to be added and their locations;
     The group's proximity to credit union's nearest service 
facility, and
     Why the formation of a separate credit union for the 
group is not practical or consistent with safety and soundness 
standards. A credit union need not address every item on the list, 
simply those issues that are relevant to its particular request:
    Member location--whether the membership is widely dispersed or 
concentrated in a central location.
    Demographics--the employee turnover rate, economic status of the 
group's members, and whether the group is more apt to consist of 
savers and/or borrowers.
    Market competition--the availability of other financial 
services.
    Desired services and products--the type of services the group 
desires in comparison to the type of services a new credit union 
could offer.
    Sponsor subsidies--the availability of operating subsidies.
    The desire of the sponsor--the extent of the sponsor's interest 
in supporting a credit union charter.
    Employee interest--the extent of the employees' interest in 
obtaining a credit union charter.
    Evidence of past failure--whether the group previously had its 
own credit union or previously filed for a credit union charter.
    Administrative capacity to provide services--will the group have 
the management expertise to provide the services requested.
     If the group is eligible for membership in any other 
credit union, documentation must be provided to support inclusion of 
the group under the overlap standards set forth in Section IV.E of 
this chapter; and
     The most recent copy of the group's charter and bylaws 
or equivalent documentation (for associational groups).

IV.B.4--Corporate Restructuring

    If a select group within a federal credit union's field of 
membership undergoes a substantial restructuring, a change to the 
credit union's field of membership may be required if the credit 
union is to continue to provide service to the select group. NCUA 
permits a multiple common bond credit union to maintain in its field 
of membership a sold, spun-off, or merged select group to which it 
has been providing service. This type of amendment to the credit 
union's charter is not considered an expansion; therefore, the 
criteria relating to adding new groups are not applicable.
    When two groups merge and each is in the field of membership of 
a credit union, then both (or all affected) credit unions can serve 
the resulting merged group, subject to any existing geographic 
limitation and without regard to any overlap provisions. However, 
the credit unions cannot serve the other multiple groups that may be 
in the field of membership of the other credit union.

IV.C--NCUA's Procedures for Amending the Field of Membership

IV.C.1--General

    All requests for approval to amend a federal credit union's 
charter must be submitted to the Office of Consumer Protection 
Director.

IV.C.2--Office of Consumer Protection Director Decision

    NCUA staff will review all amendment requests in order to ensure 
conformance to NCUA policy.
    Before acting on a proposed amendment, the Office of Consumer 
Protection Director may require an on-site review. In addition, the 
Office of Consumer Protection Director may, after taking into 
account the significance of the proposed field of membership 
amendment, require the applicant to submit a business plan 
addressing specific issues.
    The financial and operational condition of the requesting credit 
union will be considered in every instance. An expanded field of 
membership may provide the basis for reversing adverse trends. In 
such cases, an amendment to expand the field of membership may be 
granted notwithstanding the credit union's adverse trends. The 
applicant credit union must clearly establish that the approval of 
the expanded field of membership meets the requirements of Section 
IV.B.2 of this chapter and will not increase the risk to the NCUSIF.

IV.C.3--Office of Consumer Protection Director Approval

    If the Office of Consumer Protection Director approves the 
requested amendment, the credit union will be issued an amendment to 
Section 5 of its charter.

IV.C.4--Office of Consumer Protection Director Disapproval

    When the Office of Consumer Protection Director disapproves any 
application, in whole or in part, to amend the field of membership 
under this chapter, the applicant will be informed in writing of 
the:
     Specific reasons for the action;
     Options to consider, if appropriate, for gaining 
approval; and
     Appeal procedure.

IV.C.5--Appeal of Office of Consumer Protection Director Decision

    If a field of membership expansion request, merger, or spin-off 
is denied by staff, the federal credit union may appeal the decision 
to the NCUA Board. An appeal must be sent to the NCUA Board 
Secretary within 60 days of the date of denial and must be clearly 
identified as such and address the reason(s) the federal credit 
union disagrees with the denial. A copy of the appeal must be sent 
to the Office of Consumer Protection or, as applicable, the 
appropriate regional office. NCUA central office staff will make an 
independent review of the facts and present the appeal to the NCUA 
Board with a recommendation.
    Before appealing, the credit union may, within 30 days of the 
denial, provide supplemental information to the office rendering the 
initial decision for reconsideration. A reconsideration will contain 
new and material evidence addressing the reasons for the initial 
denial. The office rendering the initial decision will have 30 days 
from the date of the receipt of the request for reconsideration to 
make a final decision. If the request is again denied, the applicant 
may proceed with the appeal

[[Page 76769]]

process within 60 days of the date of the last denial. A second 
request for reconsideration will be treated as an appeal to the NCUA 
Board.

IV.D--Mergers, Purchase and Assumptions, and Spin-Offs

    In general, other than the addition of select groups, there are 
three additional ways a multiple common bond federal credit union 
can expand its field of membership:
     By taking in the field of membership of another credit 
union through a merger;
     By taking in the field of membership of another credit 
union through a purchase and assumption (P&A); or
     By taking a portion of another credit union's field of 
membership through a spin-off.

IV.D.1--Voluntary Mergers

a. All Select Groups in the Merging Credit Union's Field of Membership 
Have Less Than 3,000 Primary Potential Members

    A voluntary merger of two or more federal credit unions is 
permissible as long as each select group in the merging credit 
union's field of membership has less than 3,000 primary potential 
members. While the merger requirements outlined in Section 205 of 
the Federal Credit Union Act must still be met, the requirements of 
Chapter 2, Section IV.B.2 of this manual are not applicable.

b. One or More Select Groups in the Merging Credit Union's Field of 
Membership Has 3,000 or More Primary Potential Members

    If the merging credit unions serve the same group, and the group 
consists of 3,000 or more primary potential members, then the 
ability to form a separate credit union analysis is not required for 
that group. If the merging credit union has any other groups 
consisting of 3,000 or more primary potential members, special 
requirements apply. NCUA will analyze each group of 3,000 or more 
primary potential members, except as noted above, to determine 
whether the formation of a separate credit union by such a group is 
practical. If the formation of a separate credit union by such a 
group is not practical because the group lacks sufficient volunteer 
and other resources to support the efficient and effective 
operations of a credit union or does not meet the economic advisable 
criteria outlined in Chapter 1 of this manual, the group may be 
merged into a multiple common bond credit union. If the formation of 
a separate credit union is practical, the group must be spun-off 
before the merger can be approved.

c. Merger of a Single Common Bond Credit Union Into a Multiple Common 
Bond Credit Union

    A financially healthy single common bond credit union with a 
primary potential membership of 3,000 or more cannot merge into a 
multiple common bond credit union, absent supervisory reasons, 
unless the continuing credit union already serves the same group.

d. Merger Approval

    If the merger is approved, the qualifying groups within the 
merging credit union's field of membership will be transferred 
intact to the continuing credit union and can continue to be served.
    Where the merging credit union is state-chartered, the field of 
membership rules applicable to a federal credit union apply.
    Mergers must be approved by the NCUA regional director where the 
continuing credit union is headquartered, with the concurrence of 
the regional director of the merging credit union, and, as 
applicable, the state regulators.

IV.D.2--Supervisory Mergers

    The NCUA may approve the merger of any federally insured credit 
union when safety and soundness concerns are present without regard 
to the 3,000 numerical limitation. The credit union need not be 
insolvent or in danger of insolvency for NCUA to use this statutory 
authority. Examples constituting appropriate reasons for using this 
authority are: Abandonment of the management and/or officials and an 
inability to find replacements, loss of sponsor support, serious and 
persistent record-keeping problems, sustained material decline in 
financial condition, or other serious or persistent circumstances.

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.
    If not corrected, conditions that could lead to insolvency 
include, but are not limited to:
     Abandonment by management;
     Loss of sponsor;
     Serious and persistent record-keeping problems; or
     Serious and persistent operational concerns.
    In an emergency merger situation, NCUA will take an active role 
in finding a suitable merger partner (continuing credit union). NCUA 
is primarily concerned that the continuing credit union has the 
financial strength and management expertise to absorb the troubled 
credit union without adversely affecting its own financial condition 
and stability.
    As a stipulated condition to an emergency merger, the field of 
membership of the merging credit union may be transferred intact to 
the continuing federal credit union without regard to any field of 
membership restrictions including numerical limitation requirements. 
Under this authority, any single occupational or associational 
common bond, multiple common bond, or community charter may merger 
into a multiple common bond credit union and that credit union can 
continue to serve the merging credit union's field of membership. 
Subsequent field of membership expansions of the continuing multiple 
common bond credit union must be consistent with multiple common 
bond policies.
    Emergency mergers involving federally insured credit unions in 
different NCUA regions must be approved by the regional director 
where the continuing credit union is headquartered, with the 
concurrence of the regional director of the merging credit union 
and, as applicable, the state regulators.

IV.D.4--Purchase and Assumption (P&A)

    Another alternative for acquiring the field of membership of a 
failing credit union is through a consolidation known as a P&A. 
Generally, the requirements applicable to field of membership 
expansions found in this chapter apply to purchase and assumptions 
where the purchasing credit union is a federal charter.
    A P&A has limited application because, in most cases, the 
failing credit union must be placed into involuntary liquidation. 
However, in the few instances where a P&A may occur, the assuming 
federal credit union, as with emergency mergers, may acquire the 
entire field of membership if the emergency criteria are satisfied. 
Specified loans, shares, and certain other designated assets and 
liabilities, without regard to field of membership restrictions, may 
also be acquired without changing the character of the continuing 
federal credit union for purposes of future field of membership 
amendments. Subsequent field of membership expansions must be 
consistent with multiple common bond policies.
    P&As involving federally insured credit unions in different NCUA 
regions must be approved by the regional director where the 
continuing credit union is headquartered, with the concurrence of 
the regional director of the purchased and/or assumed credit union 
and, as applicable, the state regulators.

IV.D.5--Spin-Offs

    A spin-off occurs when, by agreement of the parties, a portion 
of the field of membership, assets, liabilities, shares, and capital 
of a credit union are transferred to a new or existing credit union. 
A spin-off is unique in that usually one credit union has a field of 
membership expansion and the other loses a portion of its field of 
membership.
    All common bond requirements apply regardless of whether the 
spun-off group becomes a new charter or goes to an existing federal 
charter.
    The request for approval of a spun-off group must be supported 
with a plan that addresses, at a minimum:
     Why the spin-off is being requested;
     What part of the field of membership is to be spun off;
     Which assets, liabilities, shares, and capital are to 
be transferred;
     The financial impact the spin-off will have on the 
affected credit unions;
     The ability of the acquiring credit union to 
effectively serve the new members;
     The proposed spin-off date; and
     Disclosure to the members of the requirements set forth 
above.
    The spin-off request must also include current financial 
statements from the affected credit unions and the proposed voting 
ballot.

[[Page 76770]]

    For federal credit unions spinning off a group, membership 
notice and voting requirements and procedures are the same as for 
mergers (see part 708 of the NCUA Rules and Regulations), except 
that only the members directly affected by the spin-off--those whose 
shares are to be transferred--are permitted to vote. Members whose 
shares are not being transferred will not be afforded the 
opportunity to vote. All members of the group to be spun off 
(whether they voted in favor, against, or not at all) will be 
transferred if the spin-off is approved by the voting membership. 
Voting requirements for federally insured state credit unions are 
governed by state law.
    Spin-offs involving federally insured credit unions in different 
NCUA regions must be approved by all regional directors where the 
credit unions are headquartered and the state regulators, as 
applicable. Spin-offs in the same region also require approval by 
the state regulator, as applicable.

IV.E--Overlaps

IV.E.1--General

    An overlap exists when a group of persons is eligible for 
membership in two or more credit unions, including state charters. 
An overlap is permitted when the expansion's beneficial effect in 
meeting the convenience and needs of the members of the group 
proposed to be included in the field of membership outweighs any 
adverse effect on the overlapped credit union.
    Credit unions must investigate the possibility of an overlap 
with federally insured credit unions prior to submitting an 
expansion request if the group has 5,000 or more primary potential 
members. If cases arise where the assurance given to the Office of 
Consumer Protection Director concerning the unavailability of credit 
union service is inaccurate, the misinformation may be grounds for 
removal of the group from the federal credit union's charter.
    When an overlap situation requiring analysis does arise, 
officials of the expanding credit union must ascertain the views of 
the overlapped credit union. If the overlapped credit union does not 
object, the applicant must submit a letter or other documentation to 
that effect. If the overlapped credit union does not respond, the 
expanding credit union must notify NCUA in writing of its attempt to 
obtain the overlapped credit union's comments.
    NCUA will approve an overlap if the expansion's beneficial 
effect in meeting the convenience and needs of the members of the 
group outweighs any adverse effect on the overlapped credit union.
    In reviewing the overlap, the Office of Consumer Protection 
Director will consider:
     The view of the overlapped credit union(s);
     Whether the overlap is incidental in nature--the group 
of persons in question is so small as to have no material effect on 
the original credit union;
     Whether there is limited participation by members or 
employees of the group in the original credit union after the 
expiration of a reasonable period of time;
     Whether the original credit union fails to provide 
requested service;
     Financial effect on the overlapped credit union;
     The desires of the group(s);
     The desire of the sponsor organization; and
     The best interests of the affected group and the credit 
union members involved.
    Generally, if the overlapped credit union does not object, and 
NCUA determines that there is no safety and soundness problem, the 
overlap will be permitted.
    Potential overlaps of a federally insured state credit union's 
field of membership by a federal credit union will generally be 
analyzed in the same way as if two federal credit unions were 
involved. Where a federally insured state credit union's field of 
membership is broadly stated, NCUA will exclude its field of 
membership from any overlap protection.
    NCUA will permit multiple common bond federal credit unions to 
overlap community charters without performing an overlap analysis.

IV.E.2--Overlap Issues as a Result of Organizational Restructuring

    A federal credit union's field of membership will always be 
governed by the field of membership descriptions contained in 
Section 5 of its charter. Where a sponsor organization expands its 
operations internally, by acquisition or otherwise, the credit union 
may serve these new entrants to its field of membership if they are 
part of any select group listed in Section 5. Where acquisitions are 
made which add a new subsidiary, the group cannot be served until 
the subsidiary is included in the field of membership through a 
housekeeping amendment.
    A federal credit union's field of membership will always be 
governed by the field of membership descriptions contained in 
Section 5 of its charter. Where a sponsor organization expands its 
operations internally, by acquisition or otherwise, the credit union 
may serve these new entrants to its field of membership if they are 
part of any select group listed in Section 5. Where acquisitions are 
made which add a new subsidiary, the group cannot be served until 
the subsidiary is included in the field of membership through a 
housekeeping amendment.
    Overlaps may occur as a result of restructuring or merger of the 
parent organization. When such overlaps occur, each credit union 
must request a field of membership amendment to reflect the new 
groups each wishes to serve. The credit union can continue to serve 
any current group in its field of membership that is acquiring a new 
group or has been acquired by a new group. The new group cannot be 
served by the credit union until the field of membership amendment 
is approved by NCUA.
    Credit unions affected by organizational restructuring or merger 
should attempt to resolve overlap issues among themselves. Unless an 
agreement is reached limiting the overlap resulting from the 
corporate restructuring, NCUA will permit a complete overlap of the 
credit unions' fields of membership. When two groups merge, or one 
group is acquired by the other, and each is in the field of 
membership of a credit union, both (or all affected) credit unions 
can serve the resulting merged or acquired group, subject to any 
existing geographic limitation and without regard to any overlap 
provisions. This is accomplished through a housekeeping amendment.
    Credit unions must submit to NCUA documentation explaining the 
restructuring and provide information regarding the new 
organizational structure.

IV.E.3--Exclusionary Clauses

    An exclusionary clause is a limitation precluding the credit 
union from serving the primary members of a portion of a group 
otherwise included in its field of membership. NCUA no longer grants 
exclusionary clauses. Those granted prior to the adoption of this 
new Chartering and Field of Membership Manual will remain in effect 
unless the credit unions agree to remove them or one of the affected 
credit unions submits a housekeeping amendment to have it removed.

IV.F--Charter Conversion

    A multiple common bond federal credit union may apply to convert 
to a community charter provided the field of membership requirements 
of the community charter are met. Groups within the existing charter 
which cannot qualify in the new charter cannot be served except for 
members of record, or groups or communities obtained in an emergency 
merger or P&A. A credit union must notify all groups that will be 
removed from the field of membership as a result of conversion. 
Members of record can continue to be served. Also, in order to 
support a case for a conversion, the applicant federal credit union 
may be required to develop a detailed business plan as specified in 
Chapter 2, Section V.A.3 of this manual.
    A multiple common bond federal credit union may apply to convert 
to a single occupational or associational common bond charter 
provided the field of membership requirements of the new charter are 
met. Groups within the existing charter, which do not qualify in the 
new charter, cannot be served except for members of record, or 
groups or communities obtained in an emergency merger or P&A. A 
credit union must notify all groups that will be removed from the 
field of membership as a result of conversion.

IV.G--Credit Union Requested Removal of Groups From the Field of 
Membership

    A credit union may request removal of a group from its field of 
membership for various reasons. The most common reasons for this 
type of amendment are:
     The group is within the field of membership of two 
credit unions and one wishes to discontinue service;
     The federal credit union cannot continue to provide 
adequate service to the group;
     The group has ceased to exist;
     The group does not respond to repeated requests to 
contact the credit union or refuses to provide needed support;
     The group initiates action to be removed from the field 
of membership; or

[[Page 76771]]

     The federal credit union wishes to convert to a single 
common bond.
    When a federal credit union requests an amendment to remove a 
group from its field of membership, the Office of Consumer 
Protection Director will determine why the credit union desires to 
remove the group. If the Office of Consumer Protection Director 
concurs with the request, membership will continue for those who are 
already members under the ``once a member, always a member'' 
provision of the Federal Credit Union Act.

IV.H--NCUA Supervisory Action To Remove Groups From the Field of 
Membership

    NCUA has in place quality control processes that protect the 
integrity of its field of membership requirements. As part of this 
obligation, NCUA's Office of Consumer Protection will randomly 
select groups added through NCUA's Field of Membership Internet 
Application (FOMIA) system for quality assurance reviews even if the 
expansion application meets all the conditions for approval. Each 
FCU is responsible for obtaining certain documentation when seeking 
to add groups to its field of membership through FOMIA. In addition, 
as indicated in the FOMIA User Instruction Guide, available on 
NCUA's Web site, an FCU must permanently retain the documentation 
from the select group requesting service and the Confirmation 
Certificate generated at the time the FOMIA request is submitted to 
NCUA.
    As part of the quality assurance process, OCP reserves the right 
to request this documentation at any time. If the FCU fails to 
provide this documentation when OCP requests it, OCP may consider 
removing the group from the FCU's field of membership and 
restricting the FCU from using the FOMIA system for future requests. 
Specifically, as part of the FOMIA quality assurance process, OCP 
staff will do the following:
    1. Within 10 days of receiving an application selected for a 
quality assurance review, notify the FCU of the documentation OCP 
requires. The FCU will have 15 days to provide the necessary 
documentation. OCP staff will respond to the FCU with a 
determination on the quality assurance review of the association 
within 15 days of receiving the requested information;
    2. After receiving the additional documentation, if any concerns 
remain outstanding, OCP staff will again correspond with the FCU and 
provide a 15-day time frame for correcting the concern. OCP staff 
will respond to the FCU with a determination on the quality 
assurance review of the association within 15 days of receiving the 
requested information; and
    3. If the FCU does not provide the requested documentation, or 
cannot correct the concern, the OCP Director will deny the 
application and notify the credit union of its appeal rights.

IV.I--NCUA Investigation of Potential Field of Membership Violations

    NCUA's Office of Consumer Protection (OCP) is responsible for 
investigating field of membership complaints from the public, and 
matters referred to it from the field. It also pursues corrective 
action as needed for FCUs with confirmed field of membership 
violations. Although circumstances can vary with each case, OCP 
staff will generally adhere to the following process for 
investigating and addressing potential field of membership 
violations:
    1. Initially correspond with management to outline concerns and 
request clarifying information within 60 days. OCP staff will also 
provide context as to the source of OCP's concerns, such as the 
discovery of new information about a particular group or an 
examination finding brought to OCP's attention;
    2. If OCP does not receive the requested information within 60 
days, it will notify the FCU and again request the required 
information be provided within 30 days;
    3. After receiving the additional documentation, if any concerns 
remain outstanding, OCP staff will again correspond with the FCU to 
provide a 60-day time frame for addressing the concern; and
    4. If the FCU is unable to correct the concern, and after 
consultation with the Office of General Counsel and the appropriate 
Regional Office, and in accordance with agency guidelines for 
administrative actions, OCP will remove the group from the FCU's 
field of membership pursuant to authority delegated by the NCUA 
Board. Removal of a group is treated the same as an initial denial 
under the Chartering Manual. In any adverse final determination on 
removal under the above delegations, OCP will notify the FCU of its 
appeal rights.
    NCUA considers the removal of an association from an FCU's field 
of membership as an action of last resort. If a group is removed, 
the FCU can no longer add new members from the group, but can 
continue serving those who are already members of the FCU under the 
``once a member, always a member'' provision of the Federal Credit 
Union Act. Also, if the group subsequently qualifies due to changes 
to the group itself, management can submit a new application at that 
time.

IV.J--Other Persons Eligible for Credit Union Membership

    A number of persons, by virtue of their close relationship to a 
common bond group, may be included, at the charter applicant's 
option, in the field of membership. These include the following:
     Spouses of persons who died while within the field of 
membership of this credit union;
     Employees of this credit union;
     Persons retired as pensioners or annuitants from the 
above employment;
     Volunteers;
     Members of the immediate family or household;
     Honorably discharged veterans who served in any of the 
Armed Services of the United States in this charter;
     Organizations of such persons; and
     Corporate or other legal entities in this charter.
    Immediate family is defined as spouse, child, sibling, parent, 
grandparent, or grandchild. This includes stepparents, stepchildren, 
stepsiblings, and adoptive relationships.
    Household is defined as persons living in the same residence 
maintaining a single economic unit.
    Membership eligibility is extended only to individuals who are 
members of an ``immediate family or household'' of a credit union 
member. It is not necessary for the primary member to join the 
credit union in order for the immediate family or household member 
of the primary member to join, provided the immediate family or 
household clause is included in the field of membership. However, it 
is necessary for the immediate family member or household member to 
first join in order for that person's immediate family member or 
household member to join the credit union. A credit union can adopt 
a more restrictive definition of immediate family or household.
    Volunteers, by virtue of their close relationship with a sponsor 
group, may be included. Examples include volunteers working at a 
hospital or church.
    Under the Federal Credit Union Act, once a person becomes a 
member of the credit union, such person may remain a member of the 
credit union until the person chooses to withdraw or is expelled 
from the membership of the credit union. This is commonly referred 
to as ``once a member, always a member.'' The ``once a member, 
always a member'' provision does not prevent a credit union from 
restricting services to members who are no longer within the field 
of membership.

V--Community Charter Requirements

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.

V.A.2--Definition of Well-Defined Local Community and Rural 
District

    In addition to the documentation requirements in Chapter 1 of 
this manual 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,

[[Page 76772]]

township, county (single, multiple, or portions of a county) or 
their political equivalent, an individual Congressional district, 
school districts, or a clearly identifiable neighborhood. Although 
state boundaries are well-defined areas, states themselves 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. A 
Congressional district qualifies as Single Political Jurisdiction. 
If redistricting were to redraw the boundaries of a Congressional 
district into two or more Congressional districts, an FOM consisting 
of the original Congressional district would no longer be available 
to be served by any other credit union.
     Statistical Area--The area is a designated Core Based 
Statistical Area or allowing a portion thereof, or in the case of a 
Core Based Statistical Area with Metropolitan Divisions, the area is 
a Metropolitan Division or is a portion thereof; or
     The area is a designated a Combined Statistical Area or 
a portion thereof; AND
     The Core Based Statistical Area, Metropolitan Division 
or Combined Statistical Area, or the portion thereof, must have a 
population of 2.5 million or less people.
     Compelling Evidence of Interaction or Common 
Interests--In lieu of a statistical area as defined above, this 
option applies when an area is substantially a Core Based 
Statistical Area or Combined Statistical Area, but also has an 
additional portion falling outside, and which is immediately 
adjacent to, the Core Based Statistical Area or Combined Statistical 
Area, and thus may demonstrate a sufficient level of interaction to 
qualify as a local community. For these situations, applicants have 
the option of submitting a narrative to NCUA to discuss how the 
residents meet the requirements for being a local community. NCUA 
will base its decision on a consideration of the following factors 
with respect to the proposed service area in its entirety:
    Economic Hub: Evidence indicates residents commonly travel to a 
geographically compact locale within the area for work and major 
commerce needs. Traffic flows, the presence of common or related 
industries, or unified economic planning demonstrate how the locales 
have economic interdependence.
    Population Center: Area has a dominant county or municipality 
with a significant portion of the area's population and evidence 
exists to support the relevance of the population center to all 
residents within the area.
    Quasi-Governmental Agencies: A quasi-governmental agency, such 
as a regional planning commission, covers the proposed service area 
in its entirety and derives its leadership from the area to advance 
meaningful objectives advancing the residents' common interests in 
economic development and/or improving quality of life. Success of 
agency in meeting its mission depends upon collaboration from 
throughout the area.
    Government Designations: A division of a federal or state agency 
specifically designates the proposed service area as its area of 
coverage or as a target area for specific programs.
    Shared Public Services/Facilities: Formal agreements exist that 
provide for a common need shared by all of the residents, such as 
common police or fire protection, or public utilities.
    Colleges and Universities: Evidence exists to demonstrate the 
common relevance of an institution or institutions to the entire 
area, such as unique educational initiatives to support economic 
objectives benefiting all residents and/or partnerships with local 
businesses or high schools.
    The rural district requirement is met if:
     Rural District--
     The district has well-defined, contiguous geographic 
boundaries;
     The total population of the district does not exceed 
1,000,000.
     Either more than 50% of the district's population 
resides in census blocks or other geographic areas that are 
designated as rural by either the Consumer Financial Protection 
Bureau or the United States Census Bureau, OR the district has a 
population density of 100 persons or fewer per square mile; and
     The boundaries of the well-defined rural district do 
not exceed the outer boundaries of the states that are immediately 
contiguous to the state in which the credit union maintains its 
headquarters (i.e., not to exceed the outer perimeter of the layer 
of states immediately surrounding the headquarters state). The 
affinities that apply to rural districts are the same as those that 
apply to well-defined local communities. The OMB definitions of Core 
Based Statistical Area and Metropolitan Division may be found at 
https://www.whitehouse.gov/sites/default/files/omb/bulletins/2013/b-13-01.pdf. 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. of 
this manual 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

[[Page 76773]]

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 Core Based Statistical Area 
must state in the field of membership the political jurisdiction(s) 
that comprise the Core Based Statistical Area.

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 
building or 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, Core Based Statistical Area, consisting of Broome and 
Tioga Counties, New York (a qualifying Core Based Statistical Area 
in its entirety);
     Persons who live, work, worship, or attend school in 
the portion of the Oklahoma City, OK Metropolitan Statistical Area 
that includes Canadian and Oklahoma counties, Oklahoma (two 
contiguous counties in a portion of a qualifying Core Based 
Statistical Area 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).

V.B--Field of Membership Amendments

    A community credit union may amend its field of membership by 
adding additional affinities or removing exclusionary clauses. This 
can be accomplished with a housekeeping amendment.
    A community credit union also may expand its geographic 
boundaries. Persons who live, work, worship, or attend school within 
the proposed well-defined local community, neighborhood or rural 
district must have common interests and/or interact. The credit 
union must follow the requirements of Section V.A.4 of this chapter.
    A community credit union that is based on a Single Political 
Jurisdiction, a Statistical Area (e.g., Core Based Statistical Area 
or Combined Statistical Area) or a rural district may expand its 
geographic boundaries to add a bordering area, provided the area is 
well defined and the credit union demonstrates by subjective 
evidence that persons who live, work, worship, or attend school 
within the proposed expanded community (i.e., on both sides of the 
boundary separating the existing community and the bordering area) 
have common interests and/or interact. Such a credit union applying 
to expand its geographic boundaries to add a bordering area must 
follow a streamlined version of the business plan requirements of 
Section V.A.4 of this chapter and the expanded community would be 
subject to the corresponding population limit--2.5 million in the 
case of a Core Based Statistical Area, and 1 million in the case of 
a rural district. The streamlined business plan requirements for 
adding a bordering area are:
     Anticipated marginal financial impact on the credit 
union of adding the proposed bordering area, including the need for 
additional employees and fixed assets, and the associated costs;
     A description of the current and, if applicable, 
proposed office/branch structure specific to serving the proposed 
bordering area;
     A marketing plan addressing how the new community will 
be served for the 24-month period after the proposed expansion of a 
community charter, including detailing how the credit union will 
address the unique needs of any demographic groups in the proposed 
bordering community not presently served by the credit union and how 
the credit union will market to any new groups; and
     Details, terms and conditions of any new financial 
products, programs, and services to be introduced as part of this 
expansion.

V.C--NCUA Procedures for Amending the Field of Membership

V.C.1--General

    All requests for approval to amend a community credit union's 
charter must be submitted to the Office of Consumer Protection 
Director. If a decision cannot be made within a reasonable period of 
time, the Office of Consumer Protection Director will notify the 
credit union.

V.C.2--NCUA's Decision

    The financial and operational condition of the requesting credit 
union will be considered in every instance. The economic 
advisability of expanding the field of membership of a credit union 
with financial or operational problems must be carefully considered.
    In most cases, field of membership amendments will only be 
approved for credit unions that are operating satisfactorily. 
Generally, if a federal credit union is having difficulty providing 
service to its current membership, or is experiencing financial or 
other operational problems, it may have more difficulty serving an 
expanded field of membership.
    Occasionally, however, an expanded field of membership may 
provide the basis for reversing current financial problems. In such 
cases, an amendment to expand the field of membership may be granted 
notwithstanding the credit union's financial or operational 
problems. The applicant credit union must clearly establish that the 
expanded field of membership is in the best interest of the members 
and will not increase the risk to the NCUSIF.

V.C.3--NCUA Approval

    If the requested amendment is approved by NCUA, the credit union 
will be issued an amendment to Section 5 of its charter.

V.C.4--NCUA Disapproval

    When NCUA disapproves any application to amend the field of 
membership, in whole or in part, under this chapter, the applicant 
will be informed in writing of the:
     Specific reasons for the action;
     If appropriate, options or suggestions that could be 
considered for gaining approval; and
     Appeal procedures.

V.C.5--Appeal of Office of Consumer Protection Director Decision

    If a field of membership expansion request, merger, or spin-off 
is denied by staff, the federal credit union may appeal the decision 
to the NCUA Board. An appeal must be sent to the NCUA Board 
Secretary within 60 days of the date of denial and must be clearly 
identified as such and address the specific reason(s) the federal 
credit union disagrees with the denial. A copy of the appeal must

[[Page 76774]]

be sent to the Office of Consumer Protection or, as applicable, the 
appropriate regional office. NCUA central office staff will make an 
independent review of the facts and present the appeal to the NCUA 
Board with a recommendation.
    Before appealing, the credit union may, within 30 days of the 
denial, provide supplemental information to the office rendering the 
initial decision for reconsideration. A reconsideration will contain 
new and material evidence addressing the reasons for the initial 
denial. The office rendering the initial decision will have 30 days 
from the date of the receipt of the request for reconsideration to 
make a final decision. If the request is again denied, the applicant 
may proceed with the appeal process within 60 days of the date of 
the last denial. A second request for reconsideration will be 
treated as an appeal to the NCUA Board.

V.D--Mergers, Purchase and Assumptions, and Spin-Offs

    There are three additional ways a community federal credit union 
can expand its field of membership:
     By taking in the field of membership of another credit 
union through a merger;
     By taking in the field of membership through a purchase 
and assumption (P&A); or
     By taking a portion of another credit union's field of 
membership through a spin-off.

V.D.1--Standard Mergers

    Generally, the requirements applicable to field of membership 
expansions apply to mergers where the continuing credit union is a 
community federal charter.
    Where both credit unions are community charters, the continuing 
credit union must meet the criteria for expanding the community 
boundaries. A community credit union cannot merge into a single 
occupational/associational, or multiple common bond credit union, 
except in an emergency merger. However, a single occupational or 
associational, or multiple common bond credit union can merge into a 
community charter as long as the merging credit union has a service 
facility within the community boundaries or a majority of the 
merging credit union's field of membership would qualify for 
membership in the community charter. While a community charter may 
take in an occupational, associational, or multiple common bond 
credit union in a merger, it will remain a community charter.
    Groups within the merging credit union's field of membership 
located outside of the community boundaries may not continue to be 
served. The merging credit union must notify groups that will be 
removed from the field of membership as a result of the merger. 
However, the credit union may continue to serve members of record.
    Where a state-chartered credit union is merging into a community 
federal credit union, the continuing federal credit union's field of 
membership will be worded in accordance with NCUA policy. Any 
subsequent field of membership expansions must comply with 
applicable amendment procedures.
    Mergers must be approved by the NCUA regional director where the 
continuing credit union is headquartered, with the concurrence of 
the regional director of the merging credit union, and, as 
applicable, the state regulators.

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.
    If not corrected, conditions that could lead to insolvency 
include, but are not limited to:
     Abandonment by management;
     Loss of sponsor;
     Serious and persistent record-keeping problems; or
     Serious and persistent operational concerns.
    In an emergency merger situation, NCUA will take an active role 
in finding a suitable merger partner (continuing credit union). NCUA 
is primarily concerned that the continuing credit union has the 
financial strength and management expertise to absorb the troubled 
credit union without adversely affecting its own financial condition 
and stability.
    As a stipulated condition to an emergency merger, the field of 
membership of the merging credit union may be transferred intact to 
the continuing federal credit union without regard to any field of 
membership restrictions, including the service facility requirement. 
Under this authority, a federal credit union may take in any 
dissimilar field of membership.
    Even though the merging credit union is a single common bond 
credit union or multiple common bond credit union or community 
credit union, the continuing credit union will remain a community 
charter. Future community expansions will be based on the continuing 
credit union's original community area.
    Emergency mergers involving federally insured credit unions in 
different NCUA regions must be approved by the regional director 
where the continuing credit union is headquartered, with the 
concurrence of the regional director of the merging credit union 
and, as applicable, the state regulators.

V.D.3--Purchase and Assumption (P&A)

    Another alternative for acquiring the field of membership of a 
failing credit union is through a consolidation known as a P&A. 
Generally, the requirements applicable to community expansions found 
in this chapter apply to purchase and assumptions where the 
purchasing credit union is a federal charter.
    A P&A has limited application because, in most instances, the 
failing credit union must be placed into involuntary liquidation. 
However, in the few instances where a P&A may occur, the assuming 
federal credit union, as with emergency mergers, may acquire the 
entire field of membership if the emergency criteria are satisfied.
    In a P&A processed under the emergency criteria, specified 
loans, shares, and certain other designated assets and liabilities 
may also be acquired without regard to field of membership 
restrictions and without changing the character of the continuing 
federal credit union for purposes of future field of membership 
amendments.
    If the P&A does not meet the emergency criteria, then only 
members of record can be obtained unless they otherwise qualify for 
membership in the community charter.
    P&As involving federally insured credit unions in different NCUA 
regions must be approved by the regional director where the 
continuing credit union is headquartered, with the concurrence of 
the regional director of the purchased and/or assumed credit union 
and, as applicable, the state regulators.

V.D.4--Spin-Offs

    A spin-off occurs when, by agreement of the parties, a portion 
of the field of membership, assets, liabilities, shares, and capital 
of a credit union are transferred to a new or existing credit union. 
A spin-off is unique in that usually one credit union has a field of 
membership expansion and the other loses a portion of its field of 
membership.
    All field of membership requirements apply regardless of whether 
the spun-off group goes to a new or existing federal charter.
    The request for approval of a spin-off must be supported with a 
plan that addresses, at a minimum:
     Why the spin-off is being requested;
     What part of the field of membership is to be spun off;
     Whether the field of membership requirements are met;
     Which assets, liabilities, shares, and capital are to 
be transferred;
     The financial impact the spin-off will have on the 
affected credit unions;
     The ability of the acquiring credit union to 
effectively serve the new members;
     The proposed spin-off date; and
     Disclosure to the members of the requirements set forth 
above.
    The spin-off request must also include current financial 
statements from the affected credit unions and the proposed voting 
ballot.
    For federal credit unions spinning off a portion of the 
community, membership notice and voting requirements and procedures 
are the same as for mergers (see part 708 of the NCUA Rules and 
Regulations), except that only the members directly affected by the 
spin-off--those whose shares are to be transferred--are permitted to 
vote. Members whose shares are not being transferred will not be 
afforded the opportunity to vote. All members of the group to be 
spun off (whether they voted in favor, against, or not at all) will 
be transferred if the spin-off is approved by the voting membership. 
Voting requirements for federally insured state credit unions are 
governed by state law.

[[Page 76775]]

V.E--Overlaps

V.E.1--General

    Generally, an overlap exists when a group of persons is eligible 
for membership in two or more credit unions. NCUA will permit 
community credit unions to overlap any other charters without 
performing an overlap analysis.

V.E.2--Exclusionary Clauses

    An exclusionary clause is a limitation precluding the credit 
union from serving the primary members of a portion of a group or 
community otherwise included in its field of membership. NCUA no 
longer grants exclusionary clauses. Those granted prior to the 
adoption of this new Chartering and Field of Membership Manual will 
remain in effect unless the credit unions agree to remove them or 
one of the affected credit unions submits a housekeeping amendment 
to have it removed.

V.F--Charter Conversions

    A community federal credit union may convert to a single 
occupational or associational, or multiple common bond credit union. 
The converting credit union must meet all occupational, 
associational, and multiple common bond requirements, as applicable. 
The converting credit union may continue to serve members of record 
of the prior field of membership as of the date of the conversion, 
and any groups or communities obtained in an emergency merger or 
P&A. A change to the credit union's field of membership and 
designated common bond will be necessary.
    A community credit union may convert to serve a new geographical 
area provided the field of membership requirements of V.A.3 of this 
chapter are met. Members of record of the original community can 
continue to be served.

V.G--Other Persons With a Relationship to the Community

    A number of persons who have a close relationship to the 
community may be included, at the charter applicant's option, in the 
field of membership. These include the following:
     Spouses of persons who died while within the field of 
membership of this credit union;
     Employees of this credit union;
     Volunteers in the community;
     Members of the immediate family or household; and
     Organizations of such persons
    Immediate family is defined as spouse, child, sibling, parent, 
grandparent, or grandchild. This includes stepparents, stepchildren, 
stepsiblings, and adoptive relationships.
    Household is defined as persons living in the same residence 
maintaining a single economic unit.
    Membership eligibility is extended only to individuals who are 
members of an ``immediate family or household'' of a credit union 
member. It is not necessary for the primary member to join the 
credit union in order for the immediate family or household member 
of the primary member to join, provided the immediate family or 
household clause is included in the field of membership. However, it 
is necessary for the immediate family member or household member to 
first join in order for that person's immediate family member or 
household member to join the credit union. A credit union can adopt 
a more restrictive definition of immediate family or household.
    Under the Federal Credit Union Act, once a person becomes a 
member of the credit union, such person may remain a member of the 
credit union until the person chooses to withdraw or is expelled 
from the membership of the credit union. This is commonly referred 
to as ``once a member, always a member.'' The ``once a member, 
always a member'' provision does not prevent a credit union from 
restricting services to members who are no longer within the field 
of membership.

Chapter 3--Low-Income Credit Unions and Credit Unions Serving 
Underserved Areas

I--Introduction

    One of the primary reasons for the creation of federal credit 
unions is to make credit available to people of modest means for 
provident and productive purposes. To help NCUA fulfill this 
mission, the agency has established special operational policies for 
federal credit unions that serve low-income groups and underserved 
areas. The policies provide a greater degree of flexibility that 
will enhance and invigorate capital infusion into low-income groups, 
low-income communities, and underserved areas. These unique policies 
are necessary to provide credit unions serving low-income groups 
with financial stability and potential for controlled growth and to 
encourage the formation of new charters as well as the delivery of 
credit union services in low-income communities.

II--Low-Income Credit Union

II.A--Defined

    A credit union serving predominantly low-income members may be 
designated as a low-income credit union. Section 701.34 of NCUA's 
Rules and Regulations defines the term ``low-income members'' as 
those members:
     Who make less than 80 percent of the average for all 
wage earners as established by the Bureau of Labor Statistics; or
     Whose median family income falls at or below 80 percent 
of the median family income for the nation as established by the 
Census Bureau.
    The term ``low-income members'' also includes members who are 
full-time or part-time students in a college, university, high 
school, or vocational school.
    To obtain a low-income designation from NCUA, an existing credit 
union must establish that a majority of its members meet the low-
income definition. An existing community credit union that serves a 
geographic area where a majority of residents meet the annual income 
standard is presumed to be serving predominantly low-income members. 
A low-income designation for a new credit union charter may be based 
on a majority of the potential membership.

II.B--Special Programs

    A credit union with a low-income designation has greater 
flexibility in accepting nonmember deposits insured by the NCUSIF, 
are exempt from the aggregate loan limit on business loans, and may 
offer secondary capital accounts to strengthen its capital base. It 
also may participate in special funding programs such as the 
Community Development Revolving Loan Program for Credit Unions 
(CDRLP) if it is involved in the stimulation of economic development 
and community revitalization efforts.
    The CDRLP provides both loans and grants for technical 
assistance to low-income credit unions. The requirements for 
participation in the revolving loan program are in part 705 of the 
NCUA Rules and Regulations. Only operating credit unions are 
eligible for participation in this program.

II.C--Low-Income Documentation

    A federal credit union charter applicant or existing credit 
union wishing to receive a low-income designation should forward a 
separate request for the designation to the Office of Consumer 
Protection Director, along with appropriate documentation supporting 
the request.
    For community charter applicants, the supporting material should 
include the median family income or annual wage figures for the 
community to be served. If this information is unavailable, the 
applicant should identify the individual zip codes or census tracts 
that comprise the community and NCUA will assist in obtaining the 
necessary demographic data.
    Similarly, if single occupational or associational or multiple 
common bond charter applicants cannot supply income data on its 
potential members, they should provide the Office of Consumer 
Protection Director with a list which includes the number of 
potential members, sorted by their residential zip codes, and NCUA 
will assist in obtaining the necessary demographic data.
    An existing credit union can perform a loan or membership survey 
to determine if the credit union is primarily serving low-income 
members.

II.D--Third-Party Assistance

    A low-income federal credit union charter applicant may contract 
with a third party to assist in the chartering and low-income 
designation process. If the charter is granted, a low-income credit 
union may contract with a third party to provide necessary 
management services. Such contracts should not exceed the duration 
of one year subject to renewal.

II.E--Special Rules for Low-Income Federal Credit Unions

    In recognition of the unique efforts needed to help make credit 
union service available to low-income groups, NCUA has adopted 
special rules that pertain to low-income credit union charters, as 
well as field of membership additions for low-income credit unions. 
These special rules provide additional latitude to enable 
underserved, low-income individuals to gain access to credit union 
service.
    NCUA permits credit union chartering and field of membership 
amendments based on

[[Page 76776]]

associational groups formed for the sole purpose of making credit 
union service available to low-income persons. The association must 
be defined so that all of its members will meet the low-income 
definition of Sec.  701.34 of the NCUA Rules and Regulations. Any 
multiple common bond credit union can add low-income associations to 
their fields of membership.
    A low-income designated community federal credit union has 
additional latitude in serving persons who are affiliated with the 
community. In addition to serving members who live, work, worship, 
or attend school in the community, a low-income community federal 
credit union may also serve persons who participate in programs to 
alleviate poverty or distress, or who participate in associations 
headquartered in the community.
    Examples of a low-income designated community and an 
associational-based low-income federal credit union are as follows:
     Persons who live in [the target area]; persons who 
work, worship, attend school, or participate in associations 
headquartered in [the target area]; persons participating in 
programs to alleviate poverty or distress which are located in [the 
target area]; incorporated and unincorporated organizations located 
in [the target area] or maintaining a facility in [the target area]; 
and organizations of such persons.
     Members of the Canarsie Economic Assistance League, in 
Brooklyn, NY, an association whose members all meet the low-income 
definition of Sec.  701.34 of the NCUA Rules and Regulations.

III--Service to Underserved Communities

III.A--General

    A multiple common bond federal credit union may include in its 
field of membership, without regard to location, an ``underserved 
area'' as defined by the Federal Credit Union Act. 12 U.S.C. 
1759(c)(2). The addition of an ``underserved area'' will not change 
the charter type of the multiple common bond federal credit union. 
More than one multiple common-bond federal credit union can serve 
the same ``underserved area,'' provided each credit union is 
approved as provided below.
    By adding an ``underserved area,'' a multiple common bond 
federal credit union does not become eligible to receive the 
benefits afforded to low-income designated credit unions, such as 
expanded use of nonmember deposits and access to the Community 
Development Revolving Loan Program for Credit Unions.

III.B--``Underserved Area'' Defined

    The Federal Credit Union Act defines an ``underserved area'' as 
(1) a ``local community, neighborhood, or rural district'' that (2) 
meets the definition of an ``investment area'' under section 103(16) 
of the Community Development Banking and Financial Institutions Act 
of 1994 (``CDFI''), 12 U.S.C. 4702(16), and (3) is ``underserved by 
other depository institutions'' based on data of the NCUA Board and 
the federal banking agencies.

III.B.1--Local Community

    To be eligible for approval as ``underserved,'' a proposed area 
must be a well-defined local community, neighborhood, or rural 
district as defined in Chapter 2, sections V.A.1. and V.A.2. of this 
manual.

III.B.2--Investment Area

    To be approved as an ``underserved area,'' the proposed area 
must meet the CDFI definition of an ``investment area.'' Id. Section 
4702(16). A proposed area that, at the time the credit union 
applies, is designated in its entirety as an Empowerment Zone or 
Enterprise Community (id. Section 1391) automatically qualifies as 
an ``investment area''; no further criteria of an ``investment 
area'' must be met. Id. Section 4702(16)(B). A proposed area that is 
not designated as such must qualify as an ``investment area'' under 
``the objective criteria of economic distress'' developed by the 
CDFI Fund (``distress criteria'') based on current decennial U.S. 
Census data, and also must have ``significant unmet needs'' for 
loans and financial services that credit unions are authorized to 
offer to their members. Id. Section 4702(16)(A).
    III.B.2.a--Economic Distress Criteria
    Geographic Unit(s) By Proposed Area's Location. The location of 
a proposed ``underserved area'' either within or outside of a 
Metropolitan Statistical Area corresponding to the most recent 
completed decennial census published by the U.S. Bureau of the 
Census (``decennial Census'') determines the geographic unit(s) that 
apply to determine whether the area meets the distress criteria.
    Within a Metropolitan Statistical Area. For a proposed area 
located, in whole or in part, within a Metropolitan Statistical 
Area, the permissible geographic units (``Metro units'') for 
implementing the economic distress criteria are: (i) A census tract; 
(ii) a block group; and (iii) an American Indian or Alaskan Native 
area. 12 CFR 1805.201(b)(3)(ii)(B) (2008). For ease of 
implementation, it is advisable to use a census tract as the 
proposed area's Metro unit.
    Outside a Metropolitan Statistical Area. For a proposed area 
that is located entirely outside a Metropolitan Statistical Area, 
the permissible units (``Non-Metro units'') for implementing the 
economic distress criteria are: (i) A county or equivalent area; 
(ii) a minor civil division that is a unit of local government; 
(iii) an incorporated place; (iv) a census tract; (v) a block 
numbering area; (vi) a block group; and (vii) an American Indian or 
Alaskan Native area. Id. For ease of implementation, it is advisable 
to use either a census tract or county, as the case may be, as the 
proposed area's Non-Metro unit.
    Proposed Area Consisting of a Single Metro Unit. A proposed area 
consisting of a single whole Metro unit (e.g., a single census tract 
located within a Metropolitan Statistical Area) must meet one of the 
following distress criteria, as reported by the most recent 
decennial Census:
     Unemployment. The proposed area's unemployment rate is 
at least 1.5 times the national average; or
     Poverty. At least 20 percent (20%) of the proposed 
area's population lives in poverty; or
     Median Family Income. The proposed area's Median Family 
Income (``MFI'') is at or below 80 percent (80%) of either the MFI 
of the corresponding Metropolitan Statistical Area, or of the 
national MFI for Metro Areas, whichever is greater; or
     Other Criterion. Any other economic distress criterion 
the CDFI Fund may adopt in the future.
    Id. Sec.  1805.201(b)(3)(ii)(D)(1), (b)(3)(ii)(D)(2)(i) and 
(b)(3)(ii)(D)(3) (2008).
    Proposed Area Consisting of a Single Non-Metro Unit. A proposed 
area consisting of a single whole Non-Metro unit (e.g., a single 
county located outside a Metropolitan Statistical Area) must meet 
one of the following distress criteria, as reported by the most 
recent decennial Census:
     Unemployment. The proposed area's unemployment rate is 
at least 1.5 times the national average; or
     Poverty. At least 20 percent (20%) of the proposed 
area's population lives in poverty; or
     Median Family Income. The proposed area's MFI is at or 
below 80 percent (80%) of either the corresponding state's Non-Metro 
MFI or the national MFI for Non-Metro Areas, whichever is greater; 
or
     Other Criterion. Any other economic distress criterion 
the CDFI Fund may adopt in the future.
    Id. Sec.  1805.201(b)(3)(ii)(D)(1), (b)(3)(ii)(D)(2)(ii) and 
(b)(3)(ii)(D)(3) (2008). Alternatively, a proposed area consisting 
of a single Non-Metro county (located outside a Metropolitan 
Statistical Area) may instead meet either of the following two 
criteria, as reported by the decennial Census:
     County Population Loss. County's population loss of at 
least 10 percent (10%) between the most recent and the preceding 
decennial Census; or
     County Migration Loss. County's net migration loss of 
at least 5 percent (5%) in the 5-year period preceding the most 
recent decennial Census.
    Id. Sec.  1805.201(b)(3)(ii)(D)(4) and (5) (2008).
    Proposed Area Consisting of Multiple Contiguous Units. When a 
proposed area consists of either multiple contiguous Metro units 
(e.g., a group of adjoining census tracts) or multiple contiguous 
Non-Metro units (e.g., a group of adjoining counties), a population 
threshold applies when implementing the economic distress criteria. 
At least 85 percent (85%) of the area's total population must reside 
within the units that are ``distressed,'' i.e., that meet one of the 
applicable economic distress criteria above, as reported by the 
decennial Census (Unemployment, Poverty and MFI for census tracts 
plus, for counties only, Population Loss and Migration Loss); the 
balance of the area's population may reside in the non-
``distressed'' tract(s). The population threshold is met, and the 
whole proposed area qualifies as ``distressed,'' when the 
``distressed'' units represent at least 85 percent of the area's 
total population.
    III.B.2.b--Proposed Area's ``Significant Unmet Needs''
    A proposed area that is ``distressed'' also must display 
``significant unmet needs'' for

[[Page 76777]]

loans or for one or more of the financial services credit unions are 
authorized to offer. To meet this criterion, the credit union must 
include within its Business Plan a section, one page in length, 
entitled ``Significant Unmet Needs for Credit Union Services'' 
(``SUN section'') that establishes the existence of such unmet needs 
by identifying the credit and depository needs of the community and 
detailing how the credit union plans to serve those needs. The 
credit union may choose which among the following ``credit and 
depository needs'' to address in the SUN section: Loans, share draft 
accounts, savings accounts, check cashing, money orders, certified 
checks, automated teller machines, deposit taking, safe deposit box 
services, and similar services. The existence of each ``credit and 
depository need'' the credit union identifies and plans to serve 
must be supported by objective reasons and/or accompanying 
documentation derived from an identified, authoritative source of 
the credit union's choice. Third-party documentation generally is 
the most compelling.
    III.B.3--Underserved by Other Depository Institutions
    A proposed area that meets the CDFI definition of an 
``investment area'' (i.e., is ``distressed'' and has ``significant 
unmet needs'') must also be underserved by other insured depository 
institutions, including credit unions. 12 U.S.C. 1759(c)(2)(A)(ii). 
This statutory criterion is met when the concentration of depository 
institution facilities among the population of the proposed area's 
non-``distressed'' tracts--which sets a benchmark level of adequate 
service--is greater than the concentration of facilities among the 
population of all of the proposed area's census tracts combined. 
This establishes the area's concentration of facilities ratio. If 
there are no non-``distressed'' tracts within a proposed area, a 
non-``distressed'' census tract or larger geographic unit (e.g., 
city or county) of the credit union's choice that adjoins the 
proposed area may be used to set the benchmark concentration ratio.
    Without regard to a proposed area's location within or outside a 
Metropolitan Statistical Area, this criterion compares two ratios: 
The ratio of facilities to the population of the non-``distressed'' 
tracts (the benchmark) versus the same facilities-to-population 
ratio among all the tracts of the proposed area as a whole. If the 
benchmark ratio is greater than the ratio for the whole area, then 
the area is ``underserved by other depository institutions,'' and 
vice versa.
    When, as the result of an initial Concentration of Facilities 
ratio calculation, a proposed area does not qualify as ``underserved 
by other depository institutions,'' NCUA will exclude non-depository 
banks (e.g., trust companies) and non-community credit unions (i.e., 
those institutions unable to serve the general public) from the 
computation. For the purposes of this analysis, a multiple common 
bond credit union already serving the area as an underserved area is 
considered able to serve the general public. With both of these 
exclusions, NCUA will recalculate the concentration of facilities 
ratio to determine whether, as a result, the proposed area qualifies 
as ``underserved by other depository institutions.''
    As one alternative to the concentration of facilities ratio, a 
proposed area will qualify as ``underserved by other depository 
institutions'' if it is designated an ``underserved county'' by NCUA 
based on data produced by the Consumer Financial Protection Bureau 
(available at: http://www.consumerfinance.gov/guidance/#ruralunderserved). NCUA will make its list of ``underserved 
counties'' available on its Web site.
    As another alternative to the concentration of facilities ratio, 
a proposed area will qualify as ``underserved by other depository 
institutions'' if the credit seeking to serve it, using a metric of 
its own choosing that is based on NCUA or other Federal banking 
agency data, establishes to NCUA's satisfaction that the proposed 
area is ``underserved by other depository institutions.''

III.C--NCUA Approval

    If NCUA approves the request to add an ``underserved area,'' the 
credit union will be issued an amendment to Section 5 of its 
charter.

III.D--Approval to Serve an Already Approved ``Underserved Area''

    Once a credit union is initially approved to serve an 
``underserved area,'' other credit unions that subsequently apply 
may be approved to serve the same area. To be approved, the area 
must qualify as ``underserved'' at the time the new applicant 
applies. An applicant must demonstrate the area continues to be 
``distressed'', as provided above, only if a new decennial Census 
has been published since the date the area was last approved. In any 
case, the applicant must demonstrate that the area still has 
``significant unmet needs'' for loans or credit union services (to 
qualify as an ``investment area''), and remains ``underserved by 
other depository institutions'' (to qualify as ``underserved'').

III.E--Business Plan

    A federal credit union that desires to include an underserved 
community in its field of membership must first develop, and submit 
for approval, a business plan specifying how it will serve the 
community. In addition, the business plan must include a SUN section 
as provided in Section III.B.2.b. above. The credit union will be 
expected to regularly review the business plan to determine if the 
community is being adequately served. The Office of Consumer 
Protection Director may require periodic service status reports from 
a credit union about the ``underserved area'' to ensure that the 
needs of the community are being met, and must require such reports 
before NCUA allows a multiple common bond federal credit union to 
add an additional ``underserved area.''

III.F--Service Facility

    Once an ``underserved area'' has been added to a federal credit 
union's field of membership, the credit union must establish within 
two years, and maintain, an office or service facility in the 
community. A service facility is defined as a place where shares are 
accepted for members' accounts, loan applications are accepted and 
loans are disbursed. By definition, a service facility includes a 
credit union-owned branch, a shared branch, a mobile branch, or an 
office operated on a regularly scheduled weekly basis or a credit 
union owned electronic facility that meets, at a minimum, the above 
requirements. This definition does not include an ATM or the credit 
union's Internet Web site.

IV--Appeal Procedures for Denial of Underserved Area

IV.A--NCUA Disapproval

    When NCUA disapproves any application to add an ``underserved 
area'' in whole or in part, under this chapter, the applicant will 
be informed in writing of the:
     Specific reasons for the action;
     Options to consider, if appropriate, for gaining 
approval; and
     Appeal procedures.

IV.B--Appeal of Office of Consumer Protection Director Decision

    If the Office of Consumer Protection Director denies an 
``underserved area'' request, the federal credit union may appeal 
the decision to the NCUA Board. An appeal must be sent to the NCUA 
Board Secretary within 60 days of the date of denial. The appeal 
must be clearly identified as such and address the specific 
reason(s) the federal credit union disagrees with the denial. A copy 
of the appeal must be sent to the Office of Consumer Protection. 
NCUA central office staff will make an independent review of the 
facts and present the appeal to the NCUA Board with a 
recommendation.
    Before appealing, the credit union may, within 30 days of the 
denial, provide supplemental information to the Office of Consumer 
Protection Director for reconsideration. A reconsideration will 
contain new and material evidence addressing the reasons for the 
initial denial. The Office of Consumer Protection Director will have 
30 days from the date of the receipt of the request for 
reconsideration to make a final decision. If the request is again 
denied, the applicant may proceed with the appeal process within 60 
days of the date of the last denial. A second request for 
reconsideration will be treated as an appeal to the NCUA Board.

Chapter 4--Charter Conversions

I--Introduction

    A charter conversion is a change in the jurisdictional authority 
under which a credit union operates.
    Federal credit unions receive their charters from NCUA and are 
subject to its supervision, examination, and regulation.
    State-chartered credit unions are incorporated in a particular 
state, receiving their charter from the state agency responsible for 
credit unions and subject to the state's regulator. If the state-
chartered credit union's deposits are federally insured, it will 
also fall under NCUA's jurisdiction.
    A federal credit union's power and authority are derived from 
the Federal Credit

[[Page 76778]]

Union Act and NCUA Rules and Regulations. State-chartered credit 
unions are governed by state law and regulation. Certain federal 
laws and regulations also apply to federally insured state chartered 
credit unions.
    There are two types of charter conversions: Federal charter to 
state charter and state charter to federal charter. Common bond and 
community requirements are not an issue from NCUA's standpoint in 
the case of a federal to state charter conversion. The procedures 
and forms relevant to both types of charter conversion are included 
in appendix 4 of this manual.

II--Conversion of a State Credit Union to a Federal Credit Union

II.A--General Requirements

    Any state-chartered credit union may apply to convert to a 
federal credit union. In order to do so it must:
     Comply with state law regarding conversion and file 
proof of compliance with NCUA;
     File the required conversion application, proposed 
federal credit union organization certificate, and other documents 
with NCUA;
     Comply with the requirements of the Federal Credit 
Union Act, e.g., chartering and reserve requirements; and
     Be granted federal share insurance by NCUA.
    Conversions are treated the same as any initial application for 
a federal charter, including an on-site examination by NCUA where 
appropriate. NCUA will also consult with the appropriate state 
authority regarding the credit union's current financial condition, 
management expertise, and past performance. Since the applicant in a 
conversion is an ongoing credit union, the economic advisability of 
granting a charter is more readily determinable than in the case of 
an initial charter applicant.
    A converting state credit union's field of membership must 
conform to NCUA's chartering policy. The field of membership will be 
phrased in accordance with NCUA chartering policy. However, if the 
converting credit union is a multiple group charter and the new 
federal charter is a multiple group, then the new federal charter 
may retain in its field of membership any group that the state 
credit union was serving at the time of conversion. Subsequent 
changes must conform to NCUA chartering policy in effect at that 
time.
    If the converting credit union is a community charter and the 
new federal charter is community-based, it must meet the community 
field of membership requirements set forth in Chapter 2, Section V 
of this manual. If the state-chartered credit union's community 
boundary is more expansive than the approved federal boundary, only 
members of record outside of the new community boundary may continue 
to be served.
    The converting credit union, regardless of charter type, may 
continue to serve members of record. The converting credit union may 
retain in its field of membership any group or community added 
pursuant to state emergency provisions.

II.B--Submission of Conversion Proposal to NCUA

    The following documents must be submitted with the conversion 
proposal:
     Conversion of State Charter to Federal Charter (NCUA 
4000);
     Organization Certificate (NCUA 4008). Only Part (3) and 
the signature/notary section should be completed and, where 
applicable, signed by the credit union officials.
     Report of Officials and Agreement to Serve (NCUA 4012);
     The Application to Convert From State Credit Union to 
Federal Credit Union (NCUA 4401);
     The Application and Agreements for Insurance of 
Accounts (NCUA 9500);
     Certification of Resolution (NCUA 9501);
     Written evidence regarding whether the state regulator 
is in agreement with the conversion proposal; and
     Business plan, as appropriate, including the most 
current financial report and delinquent loan schedule.
    If the state charter is applying to become a federal community 
charter, it must also comply with the documentation requirements 
included in Chapter 2, Section V.A.2 of this manual.

II.C--NCUA Consideration of Application To Convert

II.C.1--Review by the Office of Consumer Protection Director

    The application will be reviewed to determine that it is 
complete and that the proposal is in compliance with Section 125 of 
the Federal Credit Union Act. This review will include a 
determination that the state credit union's field of membership is 
in compliance with NCUA's chartering policies. The Office of 
Consumer Protection Director may make further investigation into the 
proposal and may require the submission of additional information to 
support the request to convert.

II.C.2--On-Site Review

    NCUA may conduct an on-site examination of the books and records 
of the credit union. Non-federally insured credit unions will be 
assessed an insurance application fee.

II.C.3--Approval by the Office of Consumer Protection Director and 
Conditions to the Approval

    The conversion will be approved by the Office of Consumer 
Protection Director if it is in compliance with Section 125 of the 
Federal Credit Union Act and meets the criteria for federal 
insurance. Where applicable, the Office of Consumer Protection 
Director will specify any special conditions that the credit union 
must meet in order to convert to a federal charter, including 
changes to the credit union's field of membership in order to 
conform to NCUA's chartering policies. Some of these conditions may 
be set forth in a Letter of Understanding and Agreement (LUA), which 
requires the signature of the officials and the appropriate NCUA 
regional director.

II.C.4--Notification

    The Office of Consumer Protection Director will notify both the 
credit union and the state regulator of the decision on the 
conversion.

II.C.5--NCUA Disapproval

    When NCUA disapproves any application to convert to a federal 
charter, the applicant will be informed in writing of the:
     Specific reasons for the action;
     Options to consider, if appropriate, for gaining 
approval; and
     Appeal procedures.

II.C.6--Appeal of Office of Consumer Protection Director Decision

    If a conversion to a federal charter is denied by the Office of 
Consumer Protection Director, the applicant credit union may appeal 
the decision to the NCUA Board. An appeal must be sent to the NCUA 
Board Secretary within 60 days of the date of denial. The appeal 
must be clearly identified as such and address the specific 
reason(s) the credit union disagrees with the denial. A copy of the 
appeal must be sent to the Office of Consumer Protection. NCUA 
central office staff will make an independent review of the facts 
and present the appeal to the NCUA Board with a recommendation.
    Before appealing, the credit union may, within 30 days of the 
denial, provide supplemental information to the Office of Consumer 
Protection Director for reconsideration. The request will not be 
considered as an appeal, but a request for reconsideration by the 
Office of Consumer Protection Director. The Office of Consumer 
Protection Director will have 30 business days from the date of the 
receipt of the request for reconsideration to make a final decision. 
If the application is again denied, the credit union may proceed 
with the appeal process to the NCUA Board within 60 days of the date 
of the last denial by the Office of Consumer Protection Director.

II.D--Action by Board of Directors

II.D.1--General

    Upon being informed of the Office of Consumer Protection 
Director's preliminary approval, the board must:
     Comply with all requirements of the state regulator 
that will enable the credit union to convert to a federal charter 
and cease being a state credit union;
     Obtain a letter or official statement from the state 
regulator certifying that the credit union has met all of the state 
requirements and will cease to be a state credit union upon its 
receiving a federal charter. A copy of this document must be 
submitted to the Office of Consumer Protection Director;
     Obtain a letter from the private share insurer 
(includes excess share insurers), if applicable, certifying that the 
credit union has met all withdrawal requirements. A copy of this 
document must be submitted to the Office of Consumer Protection 
Director; and
     Submit a statement of the action taken to comply with 
any conditions imposed by the Office of Consumer Protection Director 
in the preliminary approval of the conversion proposal and, if 
applicable, submit the signed LUA.

II.D.2--Application for a Federal Charter

    When the Office of Consumer Protection Director has received 
evidence that the board of directors has satisfactorily completed 
the actions described above, the federal charter

[[Page 76779]]

and new Certificate of Insurance will be issued.
    The credit union may then complete the conversion as discussed 
in the following section. A denial of a conversion application can 
be appealed. Refer to Section II.C.6 of this chapter.

II.E--Completion of the Conversion

II.E.1--Effective Date of Conversion

    The date on which the Office of Consumer Protection Director 
approves the Organization Certificate and the Application and 
Agreements for Insurance of Accounts is the date on which the credit 
union becomes a federal credit union. The Office of Consumer 
Protection Director will notify the credit union and the state 
regulator of the date of the conversion.

II.E.2--Assumption of Assets and Liabilities

    As of the effective date of the conversion, the federal credit 
union will be the owner of all of the assets and will be responsible 
for all of the liabilities and share accounts of the state credit 
union.

II.E.3--Board of Directors' Meeting

    Upon receipt of its federal charter, the board will hold its 
first meeting as a federal credit union. At this meeting, the board 
will transact such business as is necessary to complete the 
conversion as approved and to operate the credit union in accordance 
with the requirements of the Federal Credit Union Act and NCUA Rules 
and Regulations.
    As of the commencement of operations, the accounting system, 
records, and forms must conform to the standards established by 
NCUA.

II.E.4--Credit Union's Name

    Changing of the credit union's name on all signage, records, 
accounts, investments, and other documents should be accomplished as 
soon as possible after conversion. The credit union has 180 days 
from the effective date of the conversion to change its signage and 
promotional material. This requires the credit union to discontinue 
using any remaining stock of ``state credit union'' stationery 
immediately, and discontinue using credit cards, ATM cards, etc., 
within 180 days after the effective date of the conversion, or the 
reissue date whichever is later. The Office of Consumer Protection 
Director has the discretion to extend the timeframe for an 
additional 180 days. Member share drafts with the state-chartered 
name can be used by the members until depleted.

II.E.5--Reports to NCUA

    Within 10 business days after commencement of operations, the 
recently converted federal credit union must submit to the Office of 
Consumer Protection Director the following:
     Report of Officials (NCUA 4501); and
     Financial and Statistical Reports, as of the 
commencement of business of the federal credit union.

III--Conversion of a Federal Credit Union to a State Credit Union

III.A--General Requirements

    Any federal credit union may apply to convert to a state credit 
union. In order to do so, it must:
     Notify NCUA prior to commencing the process to convert 
to a state charter and state the reason(s) for the conversion;
     Comply with the requirements of Section 125 of the 
Federal Credit Union Act that enable it to convert to a state credit 
union and to cease being a federal credit union; and
     Comply with applicable state law and the requirements 
of the state regulator.
    It is important that the credit union provide an accurate 
disclosure of the reasons for the conversion. These reasons should 
be stated in specific terms, not as generalities. The federal credit 
union converting to a state charter remains responsible for the 
entire operating fee for the year in which it converts.

III.B--Special Provisions Regarding Federal Share Insurance

    If the federal credit union intends to continue federal share 
insurance after the conversion to a state credit union, it must 
submit an Application for Insurance of Accounts (NCUA 9600) to the 
Office of Consumer Protection Director at the time it requests 
approval of the conversion proposal. The Office of Consumer 
Protection Director has the authority to approve or disapprove the 
application.
    If the converting federal credit union does not intend to 
continue federal share insurance or if its application for continued 
insurance is denied, insurance will cease in accordance with the 
provisions of Section 206 of the Federal Credit Union Act.
    If, upon its conversion to a state credit union, the federal 
credit union will be terminating its federal share insurance or 
converting from federal to non-federal share insurance, it must 
comply with the membership notice and voting procedures set forth in 
Section 206 of the Federal Credit Union Act and part 708 of NCUA's 
Rules and Regulations, and address the criteria set forth in Section 
205(c) of the Federal Credit Union Act.
    Where the state credit union will be non-federally insured, 
federal insurance ceases on the effective date of the charter 
conversion. If it will be otherwise uninsured, then federal 
insurance will cease one year after the date of conversion subject 
to the restrictions in Section 206(d)(1) of the Federal Credit Union 
Act. In either case, the state credit union will be entitled to a 
refund of the federal credit union's NCUSIF capitalization deposit 
after the final date on which any of its shares are federally 
insured.
    The NCUA Board reserves the right to delay the refund of the 
capitalization deposit for up to one year if it determines that 
payment would jeopardize the NCUSIF.

III.C--Submission of Conversion Proposal to NCUA

    Upon approval of a proposition for conversion by a majority vote 
of the board of directors at a meeting held in accordance with the 
federal credit union's bylaws, the conversion proposal will be 
submitted to the Office of Consumer Protection Director and will 
include:
     A current financial report;
     A current delinquent loan schedule;
     An explanation and appropriate documents relative to 
any changes in insurance of member accounts;
     A resolution of the board of directors;
     A proposed Notice of Special Meeting of the Members 
(NCUA 4221);
     A copy of the ballot to be sent to all members (NCUA 
4506);
     If the credit union intends to continue with federal 
share insurance, an application for insurance of accounts (NCUA 
9600);
     Evidence that the state regulator is in agreement with 
the conversion proposal; and
     A statement of reasons supporting the request to 
convert.

III.D--Approval of Proposal to Convert

III.D.1--Review by the Office of Consumer Protection Director

    The proposal will be reviewed to determine that it is complete 
and is in compliance with Section 125 of the Federal Credit Union 
Act. The Office of Consumer Protection Director may make further 
investigation into the proposal and require the submission of 
additional information to support the request.

III.D.2--Conditions to the Approval

    The Office of Consumer Protection Director will specify any 
special conditions that the credit union must meet in order to 
proceed with the conversion.

III.D.3--Approval by the Office of Consumer Protection Director

    The proposal will be approved by the Office of Consumer 
Protection Director if it is in compliance with Section 125 and, in 
the case where the state credit union will no longer be federally 
insured, the notice and voting requirements of Section 206 of the 
Federal Credit Union Act.

III.D.4--Notification

    The Office of Consumer Protection Director will notify both the 
credit union and the state regulator of the decision on the 
proposal.

III.D.5--NCUA Disapproval

    When NCUA disapproves any application to convert to a state 
charter, the applicant will be informed in writing of the:
     Specific reasons for the action;
     If appropriate, options or suggestions that could be 
considered for gaining approval; and
     Appeal procedures.

III.D.6--Appeal of Office of Consumer Protection Director Decision

    If the Office of Consumer Protection Director denies a 
conversion to a state charter, the federal credit union may appeal 
the decision to the NCUA Board. An appeal must be sent to the NCUA 
Board Secretary within 60 days of the date of denial. The appeal 
must be clearly identified as such and address the specific 
reason(s) the federal credit union disagrees with the denial. A copy 
of the appeal must be sent to the Office of Consumer Protection. 
NCUA central office staff will make an independent review of the 
facts and present the appeal to the NCUA Board with a 
recommendation.
    Before appealing, the credit union may, within 30 days of the 
denial, provide supplemental information to the Office of

[[Page 76780]]

Consumer Protection Director for reconsideration. The request will 
not be considered as an appeal, but a request for reconsideration by 
the Office of Consumer Protection Director. The Office of Consumer 
Protection Director will have 30 business days from the date of the 
receipt of the request for reconsideration to make a final decision. 
If the application is again denied, the credit union may proceed 
with the appeal process to the NCUA Board within 60 days of the date 
of the last denial by the Office of Consumer Protection Director.

III.E--Approval of Proposal by Members

    The members may not vote on the proposal until it is approved by 
the Office of Consumer Protection Director. Once approval of the 
proposal is received, the following actions will be taken by the 
board of directors:
     The proposal must be submitted to the members for 
approval and a date set for a meeting to vote on the proposal. The 
proposal may be acted on at the annual meeting or at a special 
meeting for that purpose. The members must also be given the 
opportunity to vote by written ballot to be filed by the date set 
for the meeting.
     Members must be given advance notice (NCUA 4221) of the 
meeting at which the proposal is to be submitted. The notice must:
     Specify the purpose, time and place of the meeting;
     Include a brief, complete, and accurate statement of 
the reasons for and against the proposed conversion, including any 
effects it could have upon share holdings, insurance of member 
accounts, and the policies and practices of the credit union;
     Specify the costs of the conversion, i.e., changing the 
credit union's name, examination and operating fees, attorney and 
consulting fees, tax liability, etc.;
     Inform the members that they have the right to vote on 
the proposal at the meeting, or by written ballot to be filed not 
later than the date and time announced for the annual meeting, or at 
the special meeting called for that purpose;
     Be accompanied by a Federal to State Conversion--Ballot 
for Conversion Proposal (NCUA 4506); and
     State in bold face type that the issue will be decided 
by a majority of members who vote.
     The proposed conversion must be approved by a majority 
of all of the members who vote on the proposal, a quorum being 
present, in order for the credit union to proceed further with the 
proposition, provided federal insurance is maintained. If the 
proposed state-chartered credit union will not be federally insured, 
20 percent of the total membership must participate in the voting, 
and of those, a majority must vote in favor of the proposal. Ballots 
cast by members who did not attend the meeting but who submitted 
their ballots in accordance with instructions above will be counted 
with votes cast at the meeting. In order to have a suitable record 
of the vote, the voting at the meeting should be by written ballot 
as well.
     The board of directors shall, within 10 days, certify 
the results of the membership vote to the Office of Consumer 
Protection Director. The statement shall be verified by affidavits 
of the Chief Executive Officer and the Recording Officer on NCUA 
4505.

III.F--Compliance With State Laws

    If the proposal for conversion is approved by a majority of all 
members who voted, the board of directors will:
     Ensure that all requirements of state law and the state 
regulator have been accommodated;
     Ensure that the state charter or the license has been 
received within 90 days from the date the members approved the 
proposal to convert; and
     Ensure that the Office of Consumer Protection Director 
is kept informed as to progress toward conversion and of any 
material delay or of substantial difficulties which may be 
encountered.
    If the conversion cannot be completed within the 90-day period, 
the Office of Consumer Protection Director should be informed of the 
reasons for the delay. The Office of Consumer Protection Director 
may set a new date for the conversion to be completed.

III.G--Completion of Conversion

    In order for the conversion to be completed, the following steps 
are necessary:
     The board of directors will submit a copy of the state 
charter to the Office of Consumer Protection Director within 10 days 
of its receipt. This will be accompanied by the federal charter and 
the federal insurance certificate. A copy of the financial reports 
as of the preceding month-end should be submitted at this time.
     The Office of Consumer Protection Director will notify 
the credit union and the state regulator in writing of the receipt 
of evidence that the credit union has been authorized to operate as 
a state credit union.
     The credit union shall cease to be a federal credit 
union as of the effective date of the state charter.
     If the Office of Consumer Protection Director finds a 
material deviation from the provisions that would invalidate any 
steps taken in the conversion, the credit union and the state 
regulator shall be promptly notified in writing. This notice may be 
either before or after the copy of the state charter is filed with 
the Office of Consumer Protection Director. The notice will inform 
the credit union as to the nature of the adverse findings. The 
conversion will not be effective and completed until the improper 
actions and steps have been corrected.
     Upon ceasing to be a federal credit union, the credit 
union shall no longer be subject to any of the provisions of the 
Federal Credit Union Act, except as may apply if federal share 
insurance coverage is continued. The successor state credit union 
shall be immediately vested with all of the assets and shall 
continue to be responsible for all of the obligations of the federal 
credit union to the same extent as though the conversion had not 
taken place. Operation of the credit union from this point will be 
in accordance with the requirements of state law and the state 
regulator.
     If the Office of Consumer Protection Director is 
satisfied that the conversion has been accomplished in accordance 
with the approved proposal, the federal charter will be canceled.
     There is no federal requirement for closing the records 
of the federal credit union at the time of conversion or for the 
manner in which the records shall be maintained thereafter. The 
converting credit union is advised to contact the state regulator 
for applicable state requirements.
     The credit union shall neither use the words ``Federal 
Credit Union'' in its name nor represent itself in any manner as 
being a federal credit union.
     Changing of the credit union's name on all signage, 
records, accounts, investments, and other documents should be 
accomplished as soon as possible after conversion. Unless it 
violates state law, the credit union has 180 days from the effective 
date of the conversion to change its signage and promotional 
material. This requires the credit union to discontinue using any 
remaining stock of ``federal credit union'' stationery immediately, 
and discontinue using credit cards, ATM cards, etc., within 180 days 
after the effective date of the conversion, or the reissue date, 
whichever is later. The Office of Consumer Protection Director has 
the discretion to extend the timeframe for an additional 180 days. 
Member share drafts with the federal chartered name can be used by 
the members until depleted. If the state credit union is not 
federally insured, it must change its name and must immediately 
cease using any credit union documents referencing federal 
insurance.
     If the state credit union is to be federally insured, 
the Office of Consumer Protection Director will issue a new 
insurance certificate.

APPENDIX 1--GLOSSARY

    These definitions apply only for use with this manual. 
Definitions are not intended to be all inclusive or comprehensive. 
This manual, the Federal Credit Union Act, and NCUA Rules and 
Regulations, as well as state laws, may be used for further 
reference.
    Adequately capitalized--A credit union is considered 
``adequately capitalized'' when it meets the ``adequately 
capitalized'' definition in part 702 of NCUA's Rules and 
Regulations. A multiple common bond credit union must be 
``adequately capitalized'' in order to add new groups to its 
charter. The Office of Consumer Protection director, with input from 
the appropriate regional director, may determine that a less than 
``adequately capitalized'' credit union can qualify for an expansion 
if it is making reasonable progress toward becoming ``adequately 
capitalized,'' and the addition of the group would not adversely 
affect the credit union's capitalization level.
    Affinity--A relationship upon which a community charter is 
based. Acceptable affinities include living, working, worshiping, or 
attending school in a community.
    Appeal--The right of a credit union or charter applicant to 
request a formal review of the Office of Consumer Protection or 
regional director's adverse decision by the National Credit Union 
Administration Board.

[[Page 76781]]

    Associational common bond--A common bond comprised of members 
and employees of a recognized association. It includes individuals 
(natural persons) and/or groups (non-natural persons) whose members 
participate in activities developing common loyalties, mutual 
benefits, and mutual interests.
    Business plan--Plan submitted by a charter applicant or existing 
federal credit union addressing the economic advisability of a 
proposed charter or field of membership addition.
    Charter--The document which authorizes a group to operate as a 
credit union and defines the fundamental limits of its operating 
authority, generally including the persons the credit union is 
permitted to accept for membership. Charters are issued by the 
National Credit Union Administration for federal credit unions and 
by the designated state chartering authority for credit unions 
organized under the laws of that state.
    Common bond--The characteristic or combination of 
characteristics which distinguishes a particular group of persons 
from the general public. There are two common bonds which can serve 
as a basis for a group forming a federal credit union or being 
included in an existing federal credit union's field of membership: 
Occupational--employment by the same company, related companies or 
in a trade, industry, or profession (TIP); and associational--
membership in the same association.
    Community credit union--A credit union whose field of membership 
consists of persons who live, work, worship, or attend school in the 
same well-defined local community, neighborhood, or rural district.
    Credit union--A member-owned, not-for-profit cooperative 
financial institution formed to permit those in the field of 
membership specified in the charter to save, borrow, and obtain 
related financial services.
    Economic advisability--An overall evaluation of the credit 
union's or charter applicant's ability to operate successfully.
    Emergency merger--Pursuant to Section 205(h) of the Federal 
Credit Union Act, authority of NCUA to merge two credit unions 
without regard to common bond policy.
    Exclusionary clause--A limitation, written in a credit union's 
charter, which precludes the credit union from serving a portion of 
a group which otherwise could be included in its field of 
membership.
    Federal share insurance--Insurance coverage provided by the 
National Credit Union Share Insurance Fund and administered by the 
National Credit Union Administration. Coverage is provided for 
qualified accounts in all federal credit unions and participating 
state credit unions.
    Field of membership--The persons (including organizations and 
other legal entities) a credit union is permitted to accept for 
membership.
    Household--Persons living in the same residence maintaining a 
single economic unit.
    Housekeeping Amendment--A field of membership amendment to 
delete groups, change group names, change group locations, remove 
exclusionary clauses, and to add other persons eligible for credit 
union membership by virtue of their close relationship to a common 
bond group or the community for community charters.
    Immediate family member--A spouse, child, sibling, parent, 
grandparent, or grandchild. This includes stepparents, stepchildren, 
stepsiblings, and adoptive relationships.
    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.
    Letter of Understanding and Agreement--Agreement between NCUA 
and federal credit union officials not to engage in certain 
activities and/or to establish reasonable operational goals. These 
are normally entered into with new charter applicants for a limited 
time.
    Mentor--An individual who provides guidance and assistance to 
newly chartered, small, or low-income credit unions. All new federal 
credit unions are encouraged to establish a mentor relationship with 
a trained, experienced credit union individual or an existing credit 
union.
    Metropolitan Statistical Area--The Office of Management and 
Budget defines a metropolitan statistical area as an urbanized area 
that has at least one urbanized area in excess of 50,000 and 
``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.''
    Merger--Absorption by one credit union of all of the assets, 
liabilities and equity of another credit union. Mergers must be 
approved by the National Credit Union Administration and by the 
appropriate state regulator whenever a state credit union is 
involved.
    Multiple common bond credit union--A credit union whose field of 
membership consists of more than one group, each of which has a 
common bond of occupation or association.
    Occupational common bond--Employment by the same entity or 
related entities or a Trade, Industry, or Profession.
    Once a member, always a member--A provision of the Federal 
Credit Union Act which permits an individual to remain a member of 
the credit union until he or she chooses to withdraw or is expelled 
from the membership of the credit union. Under this provision, 
leaving a group that is named in the credit union's charter does not 
terminate an individual's membership in the credit union.
    Organizations of such persons--An organization or organizations 
composed exclusively of persons who are within the field of 
membership of the credit union.
    Overlap--The situation which results when a group is eligible 
for membership in more than one credit union.
    Primary potential members--Members or employees who belong to an 
associational or occupational group.
    Purchase and assumption--Purchase of all or part of the assets 
of and assumption of all or part of the liabilities of one credit 
union by another credit union. The purchased and assumed credit 
union must first be placed into involuntary liquidation.
    Service area--The area that can reasonably be served by the 
service facilities accessible to the groups within the field of 
membership.
    Service facility--Includes the means for a multiple common bond 
credit union to accept shares for a member's account, accept loan 
applications from the member, or disburse funds on approved loans. 
This definition includes a credit union owned branch, a mobile 
branch, an office operated on a regularly scheduled weekly basis, a 
credit union owned ATM, or a credit union owned electronic facility 
that meets, at a minimum, these transactional requirements. A 
service facility also includes a shared branch or a shared branch 
network if either: (1) The credit union has an ownership interest in 
the service facility either directly or through a CUSO or similar 
organization; or (2) the service facility is local to the credit 
union and the credit union is an authorized participant in the 
service center. For purposes of serving an underserved area, a 
service facility does not include an informational or transactional 
Web site, an ATM or an interest in a shared branch network.
    Single associational common bond credit union--A credit union 
whose field of membership includes members and employees of a 
recognized association.
    Single common bond credit union--A credit union whose field of 
membership consists of one group which has a common bond of 
occupation or association.
    Single occupational common bond credit union--A credit union 
whose field of membership consists of employees of the same entity 
or related entities or part of a Trade, Industry, or Profession 
(TIP).
    Spin-off--The transfer of a portion of the field of membership, 
assets, liabilities, shares, and capital of one credit union to a 
new or existing credit union.

[[Page 76782]]

    Subscribers--For a federal credit union, at least seven 
individuals who sign the charter application and pledge at least one 
share.
    Trade, Industry, or Profession (TIP)--A single occupational 
common bond credit union based on employment in a trade, industry, 
or profession including employment at any number of corporations or 
other legal entities that while not under common ownership--have a 
common bond by virtue of producing similar products, providing 
similar services, or participating in the same type of business.
    Underserved community--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 area must also be underserved based on 
other NCUA and federal banking agency data.
    Unsafe or unsound practice--Any action, or lack of action, which 
would result in an abnormal risk or loss to the credit union, its 
members, or the National Credit Union Share Insurance Fund.
 BILLING CODE 7535-01-P

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[FR Doc. 2015-30069 Filed 12-9-15; 8:45 am]
 BILLING CODE 7535-01-C