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Cascade: No. 63, Fall 2006

Rural Census Tracts and Disaster Areas Become CRA-Eligible

Financial institutions can now get CRA consideration for community development activities in 35 previously ineligible rural census tracts in Pennsylvania.

Last year, interagency rules applicable to all banks subject to CRA expanded the definition of community development to include activities that revitalize or stabilize distressed and/or underserved rural areas and designated disaster areas. The Board of Governors of the Federal Reserve System (FRS), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) said in a press release: “By including distressed and/or underserved rural areas, the agencies intend to recognize and encourage community development in more rural areas.” On April 12, 2006, the Office of Thrift Supervision (OTS) revised its definition of community development to include distressed, underserved, and designated disaster areas, mirroring the other agencies.

The FRS, FDIC, OCC, and OTS (the agencies) list the distressed or underserved rural areas on the website of the Federal Financial Institutions Examination Council (FFIEC). As of July 27, 2006, the list includes three categories of census tracts in Pennsylvania: 13 distressed tracts in Warren and Montour counties; nine underserved tracts in Fulton, Juniata, and Sullivan counties; and 13 distressed and underserved tracts in Forest and Susquehanna counties.

Most of these tracts were on the agencies’ original list posted in 2005. About 185,000 Pennsylvania residents live in the 35 tracts, according to the 2000 census. The latest list of distressed or underserved tracts does not include any tracts in New Jersey or Delaware.

In rural areas, the population is less dense and poverty is more dispersed than in urban areas. As a result, rural census tracts tend to be middle income, although pockets of low- and moderate-income individuals reside within them.

Distressed Areas

The agencies use the criteria for distress followed by the CDFI Fund: an unemployment rate at least one-and-a-half times greater than the national average; a poverty rate of 20 percent or more; population loss of 10 percent or more between decennial census years; and net migration loss of 5 percent or more over the five-year period prior to the most recent census.

Underserved Areas

The agencies define underserved areas using data from the United States Department of Agriculture Economic Research Service (ERS).1 In these areas, the population is so small and distant from a population center that the communities have difficulty financing essential community needs. In many cases, these tracts are removed from basic amenities like hospitals or clinics and require water and sewer, health-care facilities, and other infrastructure.

Distressed and underserved areas are updated and reviewed by the FFIEC on an annual basis. The agencies may consider CRA-related activities in distressed and/or underserved geographies for up to one year after the geographies are removed from the list.

A Community Affairs Department analysis of FDIC-insured financial institutions in Pennsylvania shows that 101 bank branches, or about 2 percent of the total number of bank branches in Pennsylvania, are located in distressed and/or underserved nonmetropolitan middle-income tracts. Twenty-four financial institutions operate the 101 branches.

Underserved and/or Distressed Middle-Income Nonmetropolitan Geographies in Pennsylvania

Designated Disaster Areas

The agencies will also consider community development activities that revitalize or stabilize designated disaster areas, which are major disasters designated by the federal government, such as major disaster declarations administered by the Federal Emergency Management Agency (FEMA). The Interagency Community Reinvestment Act (CRA) Questions and Answers Reflecting 2005 Regulation Changes (dated March 2, 2006) provides guidance on CRA-related community development activities in designated disaster areas. Sections .12(g)(4)(ii)-1 and .12(g)(4)(ii)-2 define designated disaster area and explain how revitalization or stabilization activities are considered.2

The FRS, the OCC, the OTS, and the FDIC have separately issued guidance for banks on obtaining CRA consideration in Hurricane Katrina and Hurricane Rita disaster areas. Financial institutions regulated by the FRS, OCC, OTS, and the FDIC located outside the Hurricane Katrina and Hurricane Rita disaster areas will receive consideration for activities that revitalize or stabilize the areas, provided that the banks have otherwise adequately met the needs of their assessment areas. Financial institutions with questions on this issue should check with their regulatory agency for further guidance.

For a complete listing of middle-income nonmetroplitan distressed or underserved geographies, see the FFIEC website located at www.ffiec.gov/cra/examinations.htm. To see the Federal Register notice about the CRA amendments, go to www.gpoaccess.gov/fr. Indicate 2005 (vol. 70), p. 44256, 12 CFR Part 25. For the interagency press release on the amendments, go to www. federalreserve.gov and select news and events, all press releases, and the release for July 19, 2005. The Interagency Community Reinvestment Act (CRA) Questions and Answers Reflecting 2005 Regulation Changes may be seen at www.ffiec.gov.

FEMA keeps an online list of all disaster areas at www.fema.gov. For information on CRA consideration in Hurricane Katrina and Hurricane Rita disaster areas, see the FRS Community Affairs Letter No. CA-06-5 available online at www.federalreserve.gov/
, or the OTS Memorandum available online at www.ots.treas.gov/docs/2/25232.pdf.

  • 1 Underserved geographies have one of four ERS “urban influence codes.” More information is available at www.ers.usda.gov/briefing/rurality/urbaninf.
  • 2 The Interagency Questions and Answers document said: “The Agencies generally will consider an activity to revitalize or stabilize a designated disaster area if it helps to attract new, or retain existing, businesses or residents and is related to disaster recovery. An activity will be presumed to revitalize or stabilize the area if the activity is consistent with a bona fide government revitalization or stabilization plan or disaster recovery plan. The Agencies generally will consider all activities relating to disaster recovery that revitalize or stabilize a designated disaster area, but will give greater weight to those activities that are most responsive to community needs, including the needs of low- or moderate-income individuals or neighborhoods.”