UNITED STATES OF AMERICA

BEFORE THE NATIONAL CREDIT UNION ADMINISTRATION

In the Matter of

**Cinfed Federal Credit Union** *Docket BD-06-06*

**Emery Federal Credit Union**

Joint Field of Membership Appeal

**Decision and Order on Appeal**

**Decision**

This matter comes before the National Credit Union Administration Board
(Board) on appeal from Cinfed Federal Credit Union (Cinfed) and Emery
Federal Credit Union (Emery). The Region III Director denied the both
Cinfed's and Emery's applications to convert to community charters.

**Background**

Cinfed is a multiple common bond credit union. It was chartered by the
State of Ohio in 1934 as Local #75 Federal Employees Credit Union to
serve union-affiliated government employees. In 1935 it expanded its
charter to serve all active and retired federal employees in the
Cincinnati area. It obtained a federal charter in 1975 and changed its
name to Cinfed; in 1984 and 1992 it obtained additional members through
mergers. Cinfed has continued to expand and now includes over 100 select
employee groups and has approximately 28,000 members out of a potential
of 40,000, giving it a 70% penetration rate. It has approximately \$217
million in assets. Cinfed has a long history of financial strength and
is a well-managed institution.

Emery is also a multiple common bond credit union. It was chartered in
1939 to serve employees of Emery Industries (a chemical company) located
in Cincinnati. It expanded over the years and now includes over 100
select employee groups. It has obtained additional members through four
mergers. Emery has assets of approximately \$104 million with 14,500
members out of a potential of 34,000, giving it a 43% penetration rate.
Emery has a long history of financial strength and is a well-managed
institution.

Cinfed and Emery each applied to convert to a community charter, serving
the same proposed community, an 8-county area including and surrounding
Cincinnati, Ohio. Cinfed submitted its original request to convert to a
community charter in early 2004. Region III informally deferred the
request several times with ongoing discussions with Cinfed to obtain
additional information. Cinfed submitted an addendum to its original
application in April of 2006. Emery submitted its original request to
convert to a community charter in January, 2006 and submitted an
addendum to that application in February, 2006. The Region III Director
denied Cinfed's application on October 4, 2006 and denied Emery's
application on October 12, 2006. Cinfed and Emery submitted a joint
appeal to the NCUA Board on November 17, 2006. On the same date, both
Cinfed and Emery also submitted separate individual appeal letters,
supporting the joint appeal.

**Issue for Appeal**

The issue in this joint appeal is whether the eight-county proposed area
requested qualifies as a well-defined, local community as that term is
used in the Federal Credit Union Act and NCUA's field of membership
policy.

**Law and Policy and their Application to the Conversion Requests**

For purposes of community charters, Section 109 of the Federal Credit
Union Act states that "the membership of any Federal credit union shall
be limited to ... persons or organizations within a well-defined local
community, neighborhood or rural district." 12 U.S.C. 1759(b)(3).
Congress added the word "local" to the statute when it amended the FCU
Act in 1998, but did not define the word local in either the FCU Act or
its legislative history. NCUA's current field of membership policy is
found in Interpretive Ruling and Policy Statement (IRPS) 03-1, as
amended by IRPS 06-1. The IRPS is set for in NCUA's Chartering and Field
of Membership Manual (the Manual)[^1]. The Manual states as follows:

> Community charters must be based on a single, geographically
> well-defined local community, neighborhood, or rural district where
> individuals have common interests and/or interact. ...
>
> NCUA has established the following requirements for community
> charters:
>
> -The geographic area's boundaries must be clearly defined;
>
> -The area is a "well-defined local community, neighborhood, or rural
> district;", and
>
> -Individuals must have common interests and/or interact. ...
>
> "Well-defined" means the proposed area has specific geographic
> boundaries.

Manual at 2-42.

The proposed eight-county community meets the requirement of being
well-defined in that it consists of eight contiguous counties and the
area has specific geographic boundaries.

The proposed community includes the following counties: Butler,
Clermont, Hamilton and Warren Counties, Ohio; Boone, Campbell and Kenton
Counties, Kentucky; and Dearborn County, Indiana. The eight-county area
covers 2592 square miles and its population estimate for 2005 was 1.94
million. It extends approximately 55 miles at its largest north/south
expanse and 58 miles at its largest east/west expanse. The proposed
eight-county community encompasses a portion of an Office of Management
and Budget (OMB) defined Metropolitan Statistical Area (MSA) called
OH-KY-IN (Cincinnati Middletown). The MSA includes fifteen counties. The
seven counties in the MSA that are not included in the proposed
community encompass 41% of the MSA's area, but only 6.3% of the MSA's
population.

According to OMB Bulletin 07-01 (dated December 18, 2006), an MSA is a
metropolitan area including "at least one urbanized area of 50,000 or
more population, plus adjacent territory that has a high degree of
social and economic integration with a core as measured by commuting
ties." (*See* p. 2 of Appendix to OMB Bulletin.) Hence the OMB
definition of MSA is measured by commuting ties. OMB notes that when
using the definitions for non-statistical purposes, it is the sponsoring
agency's responsibility to ensure that the definitions are appropriate
for such use and that agencies may modify the definitions for their
particular non-statistical program. (*See* pages 1 -- 2 of OMB
Bulletin.) The Chartering Manual permits the use of MSAs for purposes of
defining a local community but imposes further requirements when
population exceeds a certain level.

The Chartering Manual states that the requirements of a local community
[may be met if:]{.underline}

> The area to be served is a Metropolitan Statistical Area (MSA) ... or
> a portion thereof, where the population of the MSA ... does not exceed
> 1,000,000.

Manual at 2-42 through 2-43.

In such a case, the applicant need only submit a letter describing how
the area meets the standards for community interaction and/common
interests. NCUA will then determine if further documentation is
necessary. Since the proposed community has a population well in excess
of 1,000,000, this provision of the Chartering Manual is not applicable.

According to the Chartering Manual, if the population of a multiple
county MSA or portion thereof exceeds 1,000,000, the credit union is
required to include documentation to support that it is a well-defined
local community. The FCU may provide various types of documentation
(e.g. information on trade areas, shared common facilities,
organizations and clubs, newspapers, maps and any other documentation
that demonstrates common interest and interaction). In addition:

> It is the applicant's responsibility to demonstrate the relevance of
> the documentation provided in support of the application. This must be
> provided in a narrative summary. The narrative summary must explain
> how the documentation demonstrates interaction and/or common
> interests.

Manual at 2-43.

Cinfed and Emery provided voluminous information in both their original
applications and addenda thereto. They provided documentation and a
narrative on, among other things, employment and commuting, shopping
areas, the highway system, higher education, local airport,
entertainment, sporting and cultural events, hospitals and other medical
services, and local newspapers in order to meet the standards of a local
community, (which is to show adequate common interest or interaction
throughout the proposed community.) Employee commuting patterns showed
interaction across the entire proposed community, but the other evidence
submitted failed to show adequate interaction or common interest. A
discussion of some of the applicants' submissions follows.

[Employee Commuting Patterns]{.underline}

A majority of county residents work in their home county. However,
Hamilton County (home to Cincinnati) is the most populated county as
well as the county with most of the largest employers. It employs
approximately 497,000 workers from the eight-county area. The vast
majority of Hamilton County residents (336,000 or 84.4%) work in
Hamilton County, but there is also a large portion of residents from the
other seven counties who work in Hamilton County. Over fifty-four
percent of the eight-county work-force works in Hamilton County.
Approximately 160,000 residents of the other seven counties commute to
Hamilton County to work. We believe that the employee commuting patterns
do show interaction among residents throughout the proposed community.
OMB recognizes that an MSA has a high degree of social and economic
interaction as evidenced by commuting patterns. The Chartering Manual
permits a presumption of community when the area consists of a multiple
county MSA (or portion thereof) where the population does not exceed
1,000,000. Where, as here, the area is larger the applicant must include
documentation to support that it is a well-defined local community where
residents interact or share common interests. We now examine that
documentation.

[Shopping]{.underline}

The credit unions submitted information noting that the three largest
shopping malls are located within seven miles of each other in the north
central area of Hamilton County. They determined that this area is the
trade center of the proposed community. The credit unions submitted
estimates of mall usage per county for these as well as other malls
within the proposed community. The estimates are based on portions of
the various counties estimated to be within each mall's trade center and
estimates of populations of those portions of the counties usage of the
malls. The data submitted on concentration and location of malls and the
estimates of shoppers from the eight-county area based on concentration
and location was inconclusive regarding a showing of inter-county
interaction.

[Medical Services]{.underline}

The FCUs submitted information on medical services and hospitals located
within the proposed community. Several major hospitals are located in
Cincinnati; however, there are hospitals throughout the eight-county
area. Information provided on county residence of patients at the
eighteen largest hospitals within the proposed community indicated the
hospitals serve patients who reside within the county where the hospital
is located. This shows a lack of cross county interaction. The Greater
Cincinnati Health Council does facilitate group purchasing for 130
medical facilities (including hospitals, physician groups, and other
medical facilities). Although the Council provides a service to the
proposed community, we do not believe it adds significantly to
interaction among proposed community residents. The evidence provided on
medical services does not show significant interaction among residents
of the proposed community.

[Higher Education]{.underline}

Information submitted on higher education showing student enrollment by
county of residence indicated very limited cross county enrollment. Such
limited cross county enrollment does not provide the opportunity for
interaction among student residents of the eight counties.

[Cultural Organizations, Museums and Sporting Events]{.underline}

The credit unions provided information on sporting events and various
cultural events and museums. No information on the county residence of
attendees at such events was provided. Only estimates based on the
proportion of the populations of each county was provided. Although the
availability of multiple sports venues, museums and cultural events
provides the opportunity for interaction across the proposed community,
no evidence of such interaction was provided.

**Conclusion**

Neither the documentation nor the narrative provided demonstrates
adequate interaction or common interests for this eight-county area
encompassing portions of three states. The documentation sets forth what
services, organizations, events, festivals, etc. are available to the
residents of the proposed community. The recitation of what types of
services, etc. are available provides for the opportunity for
interaction, however, it does not, by itself, provide evidence of
interaction/common interest among residents of the proposed community.
With the exception of employee commuting patterns, the statistics
submitted did not provide for significant cross community interaction.
Neither does the narrative show how residents of this large, highly
populated area, including eight counties from three states, interact or
share common interests. It is our conclusion that the credit unions have
not provided adequate evidence that the proposed eight-county area is a
local community under the standards set forth in the Chartering Manual.

**Order**

For the reasons set forth above, it is ORDERED as follows:

The Board upholds the Region III Director's denial of Cinfed Federal
Credit Union's and Emery Federal Credit Union's requests to convert to
community charters and Cinfed Federal Credit Union's and Emery Federal
Credit Union's joint appeal is denied.

So **ORDERED** this 15th day of March 2007 by the National Credit Union
Administration Board.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Mary Rupp

Secretary of the Board

[^1]: IRPS 03-1 is set forth in the 2003 Chartering Manual. The
    amendments made by IRPS 06-1 have not yet been incorporated into the
    2003 Chartering Manual, but they are not relevant to this appeal.