But in a mixed ruling in the suit filed by the American Bankers Association, U.S. District Judge Dabney Friedrich said that the remainder of the rule conforms to federal law.

Friedrich struck down sections of the rule that:

• Automatically qualified a Combined Statistical Area or a contiguous portion of it with fewer than 2.5 million people to be a local community.
• Increases to one million people the population limit for rural districts.

The remainder of the rule, dealing with Core-Based Statistical Areas and adjacent areas, do not violate the credit union act.

In issuing the rules, the NCUA board said it was modernizing the field of membership requirements and was attempting to provide credit union services to more people.

However, the ABA filed suit, saying the new definitions exceed the agency's authority.

Friedrich noted the difficulty in defining terms, such as "rural district."

"Discerning the boundaries of vague terms—permissible boundaries, in this case—is notoriously challenging, but that is the task at hand," she wrote.

Friedrich did not buy the NCUA's argument that a 2.5 million population cap would keep distant and unconnected areas in a Combined Statistical Area from being considered a local community.

"Because any portion of a Combined Statistical Area automatically qualifies, the NCUA can do nothing to prevent a gerrymandering credit union from serving up to 2.5 million people from all ends of a Combined Statistical Area," she wrote.

She said that is "manifestly contrary to the statute."

Friedrich also threw out the section of the rule dealing with rural districts. The rule increased the population limit for rural districts from 250,000 to one million.

The rule also included a requirement that either most of the area's population must live in a rural area or the area must not be densely populated.

Friedrich said that definition is far too broad.

"Because the Rule automatically qualifies areas larger than states as rural districts even though the term commonly referred to areas smaller than a county, the NCUA's definitional decision is unreasonable and manifestly contrary to the statute," she wrote.

Friedrich said that the rule allows a credit union serving a Single Political Jurisdiction, Core-Based Statistical Area, or Combined Statistical Area to add an adjacent area as long as the credit union can demonstrate if the credit union can demonstrate that a "sufficient level of interaction" exists between the adjacent area and the already-served area.

She said that the NCUA chose "reasonable factors" for evaluating whether adjacent areas should be included.

"This permits the NCUA to bring its reason and experience to bear," she wrote.  "The NCUA's ability to accept or reject credit-union proposals on a case-by-case basis allows it to make reasonable decisions about whether a proposed area is part of a single local community."

Friedrich said that in the past, the NCUA defined a portion of a Core-Based Statistical Area as part of a local community if it included the core of the area. The new rule deletes that requirement.

The judge said that while she is troubled by that new definition, the agency has broad discretion to define "local community."

An NCUA spokesperson said the agency is still reviewing the ruling.

In a joint statement, CUNA, NAFCU and CUNA Mutual Group said that while they are pleased that the judge upheld portions of the rule, they strongly disagree with the judge's ruling striking down parts of it.

"The field-of-membership rule is not only entirely consistent with the Federal Credit Union Act, but also credit unions must have the ability to grow and serve more Americans," said NAFCU President/CEO B. Dan Berger, CUNA President/CEO Jim Nussle and CUNA Mutual Group President/CEO Robert Trunzo. "As the parties consider their options going forward, we will continue to support the agency on this critical issue."

ABA President/CEO Rob Nichols said he was pleased that part of the rule was struck down.

"It never made sense that an entire region could be declared a 'local community' or that an entire state could be declared a 'rural district,' and today's ruling recognizes that fact," he said.  "Today's decision also affirms what we have known for years – NCUA won't hesitate to push the boundaries of reason for the credit union industry even at the expense of taxpayers, small banks and the communities those banks serve."

John McKechnie, senior partner at Total Spectrum said that in the boxing world, the ruling would be considered a draw.

"It's unquestionably positive that the court validated NCUA's updates to adjacent-area and core area requirements for community charters," he said. "But it's equally disappointing that the effort to provide more access for consumers rural areas was rejected.  I hope the bank lobby is pleased that they can stand in the doorways of credit unions across America and block someone from entry."