Wednesday, April 27, 2011

Rural District

In June 2010, the National Credit Union Administration (NCUA) defined for the first time in its regulations what constitutes a rural district.

NCUA's chartering manual states that the rural district requirement is met if:
• The district has well-defined, contiguous geographic boundaries;
• More than 50% of the district’s population resides in census blocks or other
geographic areas that are designated as rural by the United States Census Bureau; and
• The total population of the district does not exceed 200,000 people; or
• The district has well-defined, contiguous geographic boundaries;
• The district does not have a population density in excess of 100 people per square
mile; and
• The total population of the district does not exceed 200,000 people.

In recent months, NCUA has approved five credit unions to serve rural districts -- Dakotaland FCU (Huron, SD), Burlington Northern FCU (Grand Forks, ND), Buckeye Community FCU (Perry, FL), and Black Hills FCU (Rapid City, SD), and Members Choice of Central Texas (Waco, TX).

Some of these rural districts do not appear to meet the statutory requirement of being local and well-defined. For example, in December of 2010, NCUA approved 25 counties in South Dakota to be served by Dakotaland as a rural district.

Perhaps more troublesome is the rural district granted Black Hills FCU. This rural district consists of Pennington, Meade, Haakon, Hughes or Stanley Counties, South Dakota. However, Pennington and Meade Counties are part of the Rapid City Metropolitan Statistical Area (MSA), while Stanley and Hughes Counties are part of the Pierre Micropolian Statistical Area.

According to U.S. Department of Agriculture's Rural-Urban Continuum Code, both Meade and Pennington Counties are defined as metro counties with populations under $250,000. Hughes County is defined as a nonmetro county with an urban population of 2,500-19,999, which is not adjacent to a metro area. Haakon County is defiend a a nonmetro county that is either completely rural or has less than 2,500 urban population, which is adjacent to a metro area, while Stanley County is a nonmetro county that is completely rural or has less than 2,500 urban population; and is not adjacent to metro area.

It does make you wonder what tortured mental gymnastics NCUA went through so that this community would meet the definition of a rural district.

This agency has a history of abusing its community chartering authority and it appears that NCUA is once again straying from its statutory mandate that a community credit union serve "persons or organizations within a well-defined local community, neighborhood, or rural district."


  1. Reminds me a lot of the 6 county community charters that were approved in Utah approximately 8 years ago. The original application was made by Tooele Federal and approved by the NCUA board. A $4 Billion CU had the same FOM approved at the district level shortly after at the district level.
    The FOM was pulled from the large CU after an ABA law suit and they moved onto filing for and receiving another FOM to served "underserved" areas defined by income levels on the census tracts. That charter was later withdrawn due to the threat of a law suit.
    The first CU to receive the 6 county community charter expanded too quickly and became insolvent two years ago. Their assets were sold at a loss to the Share Insurance Fund to Chartway CU of Virginia. The large CU continues to divide and conquer the CU world by assuming failed Credit Unions (until they started suffering significant commercial loan losses of their own).
    This goes to show how dangerous, yet calculated, the strange FOM approvals can be.

  2. And how much money has the FDIC had to pay out on interstate banks failing, on banks expanding outside their initial marketplace and how much money did the Treasury need to dump into banks that had more than 10% of banking assets (which was not allowed prior to Gramm-Leach-Bliley)?

    Pots and kettles.

  3. Un-earned market share is the ABAs only interest in farming and harvesting credit union FOM limitations via the courts.

  4. I live in Western South Dakota, and can tell you that there is a lot of nothing in between the few cities that we have. People in South Dakota are "local" two two cities, either Rapid City on the west side, or Souix Falls on the east side, even though we may have to drive quite a distance to get to them. Want to shop at a Target store, but you live in Pierre (Hughes County)? It is 142 miles to Rapid City, or 187 miles to Sioux Falls. Isn't that "rural" enough?

  5. You would have a hard time making the case that Rapid City is rural.

  6. Pennington County (the county in which Rapid city is located) has a population density of 37 people per square mile - far less than the threshold of 100 ppsm in the regs. It doesn't sound like that would be a hard case at all.



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